An individual who is a nonemployee, or an independent contractor, receives Form 1099-NEC. A non-employee is defined as a person or business who is not employed by your company, such as independent contractors, freelancers, or outsourcing companies.
The IRS instructs that a Form 1099-NEC, Nonemployee Compensation, must be completed each person who, in the previous tax year, has been paid for certain amounts. It is recommended to view the IRS instructions for the amount types and their corresponding box number, as these are susceptible to change year to year.
Be sure to report each payment in the proper box because the IRS uses this information to determine whether the recipient has properly reported the payment.
There are some notable exceptions to payments that are not required to be reported on a Form 1099-NEC, although they may be taxable to the recipient.
However, there are or may be some exceptions to the exceptions. It is always best to consult your tax advisor to determine if you should send out a Form W-9 to request information to a payee.
See the instructions for Form 1099-NEC by the IRS for more details.
Information Needed to Prepare Form 1099-NEC
Once you have determined who must receive a Form 1099-NEC, you can request their information through a W-9 form. A W-9 form, like W-4s for employees, will provide you with the relevant information for the recipient such as their name, address, and tax identification number.
After retrieving a completed W-9 from the non-employee, you will use the information provided and the finalized amounts paid to prepare a 1099-NEC.
Need More Information?
For more information on Form 1099-NEC filing, check out our other blog posts linked below:
- Gather information to prepare form(s).
- Check for accuracy.
- E-file and distribute form(s).
- Check the deadlines.
BoomTax, The Boom Post, and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors prior to engaging in any transaction.