Looking for a comprehensive DIY guide to file your 1099-NEC forms? Learn how to eFile your 1099-NEC returns online in just a few minutes with Tax1099’s easy-to-follow guide.
Tax season is approaching quickly, and with that, comes the never-ending paperwork and filings that you’re required to complete before the deadline.
And if you are thinking of doing it all by yourself, the process can eat up a lot of your productive time.
It’s no secret that Form 1099-NEC is among the most important filings with which businesses need to comply.
Things like W-9 collection, TIN Validation, reporting your non-employee compensations on the form, and beyond what you see, go into Form 1099-NEC compliance.
The good news is that the process has never been easier, thanks to Tax1099. And with our comprehensive guide, you can learn how to do it in just a few minutes.
So, let’s get started!
What Is 1099-NEC? Understanding The Form
1099-NEC, or Non-employee Compensation form, is a 1099 form used for reporting payments made to contractors and non-employed workers for services performed during the year.
If you’re a business owner, you must file a 1099-NEC for each person to whom you have paid $600 or more in a tax year.
Knowing when and how to properly file 1099-NEC forms is important. Not only filing 1099-NEC is a regulatory requirement, but failing to do so could actually result in penalty assessments from the IRS.
Did You Know?
Earlier, the IRS combined nonemployee compensation and other types of payments, such as rents and royalties, into one Form: the 1099-MISC. However, starting with the tax year 2020, the IRS restored Form 1099-NEC, requiring businesses to use two forms: the 1099-NEC for nonemployee compensation and the 1099-MISC for miscellaneous payment information reporting.
Information Reported On 1099-NEC
The goal of the 1099-NEC is to report any nonemployee compensation (NEC) that you, as a business owner, pay to another person or entity during the course of your business in exchange for their service.
This would include:
- Any freelance work performed for your business
- Payments made to independent contractors
- Other forms of payment for services not otherwise categorized
When you complete a 1099-NEC form, you’ll need to report the following payee information:
- The recipient’s name and address
- Taxpayer identification number (usually their Social Security Number (SSN) or (EIN)
- The compensations paid (usually when the amount is $600 or more)
The most common kind of payments reported on 1099-NEC are:
- Contractual payments
Businesses also need to report their own legal information, such as the business name, taxpayer identification number, address, and more.
Look at the revised 1099-NEC form for the 2022-23 tax year.
Who Files 1099-NEC Form?
The payer will be responsible for filing the 1099-NEC Form with the IRS. You’ll also need to provide the recipient with a copy of the form.
Here’s when you’ll need to file a 1099-NEC:
- You’ve made reportable payments to a non-employed worker or independent contractor in the course of trade or business.
- Your business has paid the recipient at least $600 in the tax year in exchange for services performed.
Who Receives The 1099-NEC Form?
The person or business that receives the payments reported on Form 1099-NEC is the recipient. The recipient may be an individual, corporation, partnership, estate, trust, association, or any other type of organization.
For example, you hired an electrician to fix the air conditioner at your office, and you paid him $700 for his services. You would be responsible for filing Form 1099-NEC to report the payments made to the electrician. The electrician would be the recipient of such payment and therefore, the 1099-NEC.
The business must have paid the recipient at least $600 in the year for services performed as a non-employed worker.
Form 1099-NEC: Know The Deadlines
If there’s one thing you want to avoid, it’s the attention from the IRS. This is especially true if you’re failing to comply with the tax regime and missing the deadlines.
Form 1099-NEC must be filed for every year in which you issue payments to your independent contractors. And most importantly, these forms must be filed before the due dates specified by the IRS.
Missing the deadlines can cost you plenty. This is because the IRS imposes late filing penalties for each information return you fail to file before the deadline.
To make things easy for you, we’ve put together the deadlines for Form 1099-NEC for the 2022-23 tax year.
|Filing Type||Due Date|
|Recipient Copy||Jan 31, 2023|
|IRS eFile||Jan 31, 2023|
|IRS Paper Filing||Jan 31, 2023|
The Significance Of Filing 1099-NEC: Why Does The IRS Want Businesses To File 1099-NEC?
When there’s a federal requirement to file an information return, it’s only normal to be curious about its significance. For example, why is the IRS so keen on you filing 1099-NEC forms?
Well, you’re not the first filer to question this. Many tax experts have been weighing in on the importance of the 1099 regime for years. To put it simply, the purpose of the 1099-NEC is to track income. By mandating businesses to report information about payments made to nonemployed workers, the IRS is ensuring that everyone is paying their fair share of taxes.
This is important because when businesses don’t pay their fair share of taxes, it burdens everyone else.
Why Was Form 1099-NEC Restored?
A lot of filers and tax enthusiasts have been questioning the restoration of Form 1099-NEC, especially when Form 1099-MISC was functional for this purpose.
Well, the answer is fairly simple.
In the past, businesses would report all payments made to independent contractors on Form 1099-MISC. And the figures would also include miscellaneous payments.
Some payments reported on 1099-MISC were for services while others were for rent or other expenses, which categorically did not make sense to report on the same form.
Further, payee income transparency was an unignorable issue, coupled with employee misclassification.
With the rise of employee misclassification and FLSA regulations in place, 1099-NEC was bound to be restored to make way for information reporting transparency.
As a result, the IRS restored Form 1099-NEC and accelerated the filing deadlines for all 1099s.
Now, all payments made to nonemployees will be reported on Form 1099-NEC, regardless of the payment being made out in cash or by check. This is helping the IRS track the payee income more accurately and makes it easier for businesses to file their taxes appropriately.
What Happens If You Don’t File 1099-NEC?
The answer is, unfortunately, not pleasant.
If you don’t file 1099-NEC, you may be subject to penalties from the IRS. Moreover, the IRS may even audit your business if you’re caught neglecting your tax reporting responsibilities as an employer under the voluntary tax compliance program.
What’s next? IRS audits. And no one wants that.
Here’s the penalty schedule for not filing 1099-NEC:
If you fail to file 1099-NEC on time, you will be subject to a penalty of $50 per return.
If you file 1099-NEC more than 60 days late, the penalty increases to $110 per return
And if you file 1099-NEC more than 120 days late, the penalty is a whopping $290 per return.
|Up to 30 Days Late||$50|
|31 Days Late and Beyond (Till August 1, 2023)||$110|
|After August 1 or Not Filed||$290|
As you can see, you must file 1099-NEC on time. The good news is, with Tax1099, you can easily prevent missing your 1099 deadlines, thanks to our eSchedule feature.
Just sign up and follow the instructions. We’ll help you through every step of the way so that you can prevent being issued any penalties from the IRS. With Tax1099’s Scheduling feature, you can be sure that your 1099-NEC is filed at least a week before the deadline.
eFiling 1099-NEC: How To Do It?
To eFile 1099-NEC, you need to go to an IRS-approved eFile provider like Tax1099. Only an IRS-approved eFiling provider has the authority to help you with eFiling 1099-NEC forms securely. The process is simple and straightforward; you must sign up for an account and provide the required information.
Businesses can also paper file the 1099-NEC. However, it is not recommended because of the time-consuming process of purchasing, filling out, and mailing the forms to the IRS.
But it’s not just that, mailing your forms physically comes with stamping costs, the risk of losing the mail in transit, and delayed submissions. Thanks to the Covid-19 pandemic, mailing means an increased risk of contracting the virus.
This is why a majority of business filers are switching to the smarter approach to filing with Tax1099’s eFiling.
Stepwise Instructions For eFiling 1099-NEC
The best way to start preparing your 1099-NEC forms is to start early, so you have plenty of time to gather the information you need.
To make things easier for you, we have put together a step-by-step guide on how to eFile 1099-NEC forms.
Information Required To File 1099-NEC
1) Obtain the recipient’s name, address, and TIN (Taxpayer Identification Number).
2) You will also need your company’s name, address, and FEIN (Federal Employer Identification Number).
3) The next thing you need to do is to determine the payment amount. This includes the total amount paid for the services rendered and any backup withholding that was deducted from the payment.
If you’re integrated with any of the integrations available, such as Tipalti, Accounting Suite, QuickBooks, or Excel, you can easily import this data to Tax1099 in just a few seconds.
This will reduce the time it takes to report the information on electronic forms. Tax1099 automatically reads and populates the forms with the appropriate data in seconds, cutting down your workload by at least 25%.
Box-Wise 1099-NEC Instructions: For Payers
Box 1. Non-employee Compensation: Enter the total nonemployee compensation paid during the calendar year. This includes payments made for services performed by independent contractors.
Box 2. Payer Made Direct Sales Totaling $5,000 Or More Of Consumer Products To Recipient For Resale: If you made direct sales of consumer products totaling $5,000 or more to a vendor for the purpose of resale, then you’ll need to check this box.
Box 4. Federal Income Tax Withheld: Enter the total federal income tax withheld from the nonemployee compensation paid to the independent contractor.
Boxes 5–7. State Information: These boxes are for state information. If the payee is a resident of the state where the work was performed, enter the appropriate information in boxes 5–7. Leave these boxes blank if the payee is not a resident of the state where the work was performed.
eFile 1099-NEC With IRS-Authorized Tax1099!
When you have multiple 1099-NEC Forms to file, paper filing is not only time-consuming but messy. That’s why it is recommended to eFile with an IRS-authorized eFile provider, like Tax1099.
Tax1099 is an IRS-authorized eFile provider, enabling businesses like yours to file 1099 and other form types securely and quickly. Trusted by more than 150,000 businesses, Tax1099 is the perfect solution to eFile and manage your eFiling obligations in minutes.
eFile Your 1099-NEC In 3 Simple Steps With Tax1099
Step 1: Create your account by filling in all the required information.
Step 2: Validate your account by providing all the details.
Step 3: Select 1099-NEC from the list of available forms and fill out the required information. After you’re done, simply click “Submit,” and we’ll take care of the rest.
It’s that easy.
Why Tax1099 Is The Perfect Solution For Your Business?
We’ve built Tax1099 to be intuitive.
With Tax1099, you can be confident that your forms will be filed correctly and on time.
Still not convinced? Here are some more reasons why businesses choose Tax1099 for their 1099-NEC filing needs.
- 100% Accurate TIN Matching Feature: A simple error in TIN can lead to hefty penalties and could impact your business negatively. Tax1099 gets you the TIN Match results in 30 seconds or less.
- API For Easy Integration: One of the major constraints for businesses is the lack of an efficient way to manage and file their 1099 forms. Tax1099 overcomes this by providing an API that helps businesses automate their filing process. With Our API, you can automate processes such as W-9 Collection, Real-Time TIN Check, Tax-Exempt Check, eFiling Form 1099s, and more.
- Secure & Encrypted: All data transmitted to and from Tax1099 is encrypted using the latest 256-bit bank-grade security standards and features so that you can be confident that your information is safe and secure.
So, why wait?
Sign up today and start filing your 1099-NEC forms now.