1099-NEC for vendors is a simple rule at heart. If your business paid a vendor $600 or more for services during the year, you generally file a Form 1099-NEC for that vendor. The form is due on January 31 after the year ends. That date falls just after the year closes, so the work starts in December.
This guide covers who gets a form, who usually does not, what you need from the vendor, and how to avoid a last-minute scramble. It is general information, not tax advice. Ask a tax professional about your own case.
Who gets a 1099-NEC
Form 1099-NEC reports "nonemployee compensation." The IRS says you must generally report a payment when all four of these are true:
- You paid someone who is not your employee.
- The payment was for services tied to your trade or business. Nonprofits and government agencies count as being in business for this rule.
- The vendor may be an individual or a partnership. It may also be an estate, or in some cases a corporation.
- Your total to that person reached $600 or more in the year.
The $600 is a yearly total for each vendor, not a single invoice. Three invoices of $250 add up to $750, so a form is due. The IRS lists examples such as fees to attorneys, accountants, architects, contractors and engineers. It also covers commissions and fees paid to other professionals.
Personal payments do not count. A form is only needed for payments made for your business.
Sources: IRS, Instructions for Forms 1099-MISC and 1099-NEC (Rev. January 2024), Specific Instructions for Form 1099-NEC, Box 1.
Who usually does not get one
Not every vendor payment needs a form. The IRS instructions say these are generally not reported on Form 1099-NEC:
- Most corporations. This includes a limited liability company (LLC) that is taxed as a C or S corporation. There is a key exception: attorneys' fees are reportable even when the law firm is a corporation.
- Merchandise, telephone, freight, storage and similar items. You are buying goods or basic services, not paying for someone's work.
- Payments by credit card or payment card. The card company reports these on Form 1099-K instead. You do not file a 1099-NEC for them.
- Wages paid to employees. These go on Form W-2.
The corporation rule trips people up. A vendor's name ending in "Inc." is a hint, not proof. Some LLCs are taxed as sole proprietors or partnerships, and those do get forms. The vendor's own W-9 tells you how it is taxed, which is one more reason to collect it.
Sources: IRS, Instructions for Forms 1099-MISC and 1099-NEC (Rev. January 2024), Exceptions, Reportable payments to corporations, and Form 1099-K.
The January 31 deadline
Form 1099-NEC has one of the earliest due dates in the information-return calendar. The IRS instructions say you must file it on or before January 31, on paper or electronically. You must also give the vendor their copy by the same date.
That differs from Form 1099-MISC, which has later dates: February 28 on paper and March 31 if filed electronically. Do not mix them up. A vendor who is paid for services belongs on the 1099-NEC with the January date.
There is also a filing method rule. Starting with returns due on or after January 1, 2024, the e-file threshold dropped from 250 to 10. The count adds up all information returns of all types. If you file 10 or more, you generally must file them electronically. Smaller businesses may still use paper, but the IRS points filers to its e-file options either way.
Sources: IRS, Instructions for Forms 1099-MISC and 1099-NEC (Rev. January 2024), What's New and Filing dates; IRS, About Form 1099-NEC, Nonemployee Compensation (page last reviewed September 11, 2024).
Why collect a W-9 early
To fill out the form, you need the vendor's name, address and taxpayer identification number (TIN). A TIN is a Social Security number, an employer identification number or an individual taxpayer identification number. The easiest way to get it is Form W-9, Request for Taxpayer Identification Number and Certification.
The IRS describes Form W-9 as the way a person gives the payer their correct TIN. Ask for it when you onboard the vendor, before the first payment. It is much harder to chase in January when the vendor is busy or gone.
There is a money reason too. If a vendor does not give a correct TIN, you may have to withhold tax from later payments. This is called backup withholding. The IRS says the current rate is 24 percent, and it applies to commissions, fees and other payments to independent contractors that are reported on Form 1099-NEC. Having the W-9 on file keeps you out of that situation.
A W-9 also tells you whether the vendor is a corporation, which helps you decide if a form is needed at all.
Sources: IRS, About Form W-9 (page last reviewed October 1, 2024); IRS, Backup withholding; IRS, Instructions for Forms 1099-MISC and 1099-NEC (Rev. January 2024).
A simple year-round routine
You can make January easy with a few habits that run all year.
- Get the W-9 first. Make it part of vendor setup, before the first invoice is paid.
- Tag vendors in your books. Mark each one as "1099 vendor" or "not needed" based on the W-9.
- Track payment method. Card payments go to the 1099-K and not to your 1099-NEC list, so note how each bill was paid.
- Review totals in the fall. Check which vendors are near $600. This also lets you spot missing W-9s while there is time.
- Plan the filing early. If you will file 10 or more returns, line up e-filing before the January 31 date arrives.
Keep a copy of every form you file and every W-9 you receive, and ask your tax professional how long to hold them.
Sources: IRS, Instructions for Forms 1099-MISC and 1099-NEC (Rev. January 2024); IRS, About Form W-9.
Sources
- IRS, Instructions for Forms 1099-MISC and 1099-NEC (Rev. January 2024). irs.gov/pub/irs-pdf/i1099mec.pdf
- IRS, About Form 1099-NEC, Nonemployee Compensation. irs.gov/forms-pubs/about-form-1099-nec
- IRS, About Form W-9, Request for Taxpayer Identification Number and Certification. irs.gov/forms-pubs/about-form-w-9
- IRS, Backup withholding. irs.gov/businesses/small-businesses-self-employed/backup-withholding