1099-NEC is used to report independent contractor payments as opposed to 1099-Misc that we had until last year. Form 1099-MISC is still around and it’s used to report miscellaneous income such as rent or payments to an attorney.

The due date for the 1099-NEC is January 31st and the due date for 1099-MISC is February 28th this year.

The rule is that you must file a form 1099-NEC whenever you pay an individual or an independent contractor (sole proprietor, a partnership, or LLC) more than $600 in a year (in total) for the work done in the course of your trade or business. Please do NOT file 1099-NEC for employees. All employee compensation (including wages, tips, bonus, commission, etc) must be reported on form W2. There are significant penalties for misclassifying employees as contractors.

Please note that a trade or business is an activity carried on for gain or profit i.e. you don’t have to file a 1099-NEC for payments for non-business-related services (or household service) for example babysitters, gardeners, and housekeepers.

Along with sending a copy to the contractor, a copy of the 1099 form must also be filed with the federal govt. and the state govt. For more information on 1099 filing, please check the link at the IRS website:

https://www.irs.gov/forms-pubs/about-form-1099-nec