A Quick Guide on
Form 1099-NEC for 2023: Non Employee Compensation

1. What is Form 1099 NEC?

IRS Form 1099-NEC is used to report compensation of $600 or more made to non-employees for the services they provided during the tax year. Non-employees include freelancers, independent contractors, self-employed individuals, vendors, etc.

Until the 2019 tax year, nonemployee compensation was reported on Form 1099-MISC in Box 7. Starting in 2020, it should be reported separately on Form 1099-NEC.

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2. Who Needs to File Form 1099-NEC?

The Form 1099-NEC should be filed by businesses and individuals for payments made under the following conditions:

• Payments made to someone who is not an employee.
• Payments made for services in the course of trade or business.
• Payments made to an individual, partnership, estate, or corporation.
• Payments totaling $600 or more in a year.

The form serves as a means of reporting these payments to both the IRS and the recipients, ensuring accurate income reporting and taxation.

3. What Information Is Reported on Form 1099-NEC?

Form 1099-NEC contains essential details about the payments made to 1099 contractors. The information reported on this form includes:

• The payer's and recipient's identifying information (name, address, and taxpayer identification numbers)
• Total nonemployee compensation paid during the tax year
• Any federal income tax withheld (if applicable)

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4. Importance of 1099 NEC for Independent Contractors and Businesses

5. How Does Form 1099-NEC Differ from 1099-MISC
and 1099-K?

Generally, Form 1099-NEC is filed by employers who have paid compensation to non-employees such as contractors, gig workers, etc.

On the other hand, Form 1099-MISC is filed by businesses or individuals to report other miscellaneous payments such as rent, medical and health care payments, etc.

While both these forms are filed directly by the payers themselves (businesses or individuals), Form 1099-K is filed by payment processors such as payment card companies and third-party networks to report the payments made using credit cards, debit cards, stored value cards, and payment apps.

Learn more about the differences between 1099-NEC, 1099-MISC, and 1099-K.

6. When is Form 1099-NEC 2023 due?

Form 1099-NEC is due to the IRS by January 31st of each year, regardless of your filing method (paper filing or e-filing). Recipient copies must also be distributed by January 31 2024.

If the 1099-NEC due date falls on a Federal holiday or weekend, the next business day will be the due date.

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7. What are the penalty for not filing Form 1099-NEC on-time?

Yes. The IRS will likely impose penalties for not filing the 1099-NEC on time. Also, a penalty will be imposed if the reported information was incorrect. The IRS maintains the same penalty and interest rate for all information returns including 1099-NEC. The penalty rate starts from $50 per return and can be as high as $550 per return.

Avoid being penlized by the IRS and
file 1099-NEC on time and with right information.

8. What are the different copies of Form 1099-NEC?

There are various copies of the 1099-NEC, each serving a different purpose. Here are different copies of 1099-NEC
and its purpose.

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