What Form 1099-NEC (2024) Is For
IRS Form 1099-NEC (2024) is used by businesses to report payments of $600 or more made to independent contractors and self-employed individuals for services performed during the tax year. The IRS requires this form to record nonemployee compensation, ensuring that both the business and the contractor properly report taxable income on their individual tax return.
This tax form separates nonemployee compensation from other types of income previously reported on Form 1099-MISC, such as rent paid or other forms of compensation. It supports accurate reporting of federal income tax, self-employment taxes, and Medicare taxes, which are the responsibility of the contractor, not the business.
For a detailed breakdown of filing requirements, eligibility rules, and step-by-step instructions, see our comprehensive Form 1065-X: Amended Return or Administrative Adjustment Request (AAR) – A Complete Guide for 2024.
When You’d Use Form 1099-NEC
A business must file Form 1099-NEC when it pays $600 or more in compensation to an independent contractor during the calendar year. These payments reported apply only to business-related activities, not personal payments. The tax filing deadline for the 2024 form is January 31, 2025, or the next business day if that date falls on a weekend or holiday.
The IRS requires that payers issue a form for each eligible recipient, including attorneys, freelancers, and self-employed individuals. Whether the business files electronically through the IRIS Intake System or submits a paper copy, it must follow the proper format and include the business name, payer information, and total fees paid during the year.
Key Rules or Details for 2024
For 2024, the threshold amount for reporting remains at $600 in nonemployee compensation. Businesses that file ten or more tax forms are required to e-file through the IRS Intake System. The payer must collect Form W-9 from each contractor, obtaining their Social Security Number or Employer Identification Number for accurate reporting.
If a contractor fails to provide the required information, backup withholding of 24% for federal income tax may apply. Businesses should also keep all records for at least four years and ensure all information on the form is filed correctly to avoid penalties and reporting errors.
For complete details on wage reporting, withholdings, and unemployment tax filings, see our guide for Information Returns & Reporting Forms.
Step-by-Step (High Level)
Step 1: Collect Form W-9
Collect Form W-9 from each independent contractor before any payment is made. This provides the business name, address, and taxpayer identification number, such as a Social Security Number or Employer Identification Number, needed to report payments on Form 1099.
Step 2: Track Payments Throughout the Calendar Year
Maintain accurate records of compensation paid for services performed. Monitoring totals helps determine when the threshold amount of $600 for nonemployee compensation is reached during the tax year.
Step 3: Choose How to File Form 1099-NEC
Decide whether to file electronically through the IRIS intake system or submit a paper copy. Filing electronically reduces errors and helps meet the tax filing deadline on the due date or the next business day when applicable.
Step 4: Complete the Required Tax Forms
Enter the payer information, including business name and account details, as well as the contractor information from Form W-9. Report payments in Box 1, include federal income tax withheld in Box 4 if required, and add state information when applicable.
Step 5: File Form 1099-NEC and Provide Copies
File electronically or mail the paper copy to the IRS by January 31, 2025. Provide the recipient with a copy of the contractor by the exact date and retain internal records in the proper format for future reporting needs.
Step 6: Correct Errors Promptly If Needed
File a corrected Form 1099-NEC if any amount, date, or payee detail is inaccurate. Mark the “CORRECTED” box, submit through the same e-file or paper channel used initially, and send the corrected copy to the contractor.
Common Mistakes and How to Avoid Them
Mistakes can lead to penalties, rejected filings, or mismatched IRS records. The most frequent errors include:
- Using an incorrect or mismatched name or TIN: Verify contractor information using the IRS TIN Matching Program before filing to prevent rejected forms or notices.
- Missing the tax filing deadline: Set reminders in early January and use e-filing tools to ensure forms are submitted by January 31.
- Reporting income on the wrong form: Use Form 1099-NEC for services performed and reserve Form 1099-MISC for rent, royalties, or other income types.
- Failing to report attorney payments: Report all payments made to attorneys, even if the law firm is incorporated.
- Filing for personal payments instead of business-related ones: Only report payments made in the course of a trade or business; personal expenses are not reportable.
Accurate classification, timely filing, and verification of information help businesses avoid penalties, rejections, and mismatched IRS records.
What Happens After You File
After filing, the IRS matches the information on Form 1099-NEC with each contractor’s individual tax return. The contractor reports the compensation paid as income on Schedule C and pays self-employment tax, including Social Security and Medicare taxes.
The business can deduct the payments as ordinary business expenses. If any mismatches or errors occur in the filing, the IRS may issue a notice requiring corrections. To stay compliant, the business should verify all details before submission and file a corrected form if necessary.
FAQs
Who must file IRS Form 1099-NEC for the 2024 tax year?
A business must file Form 1099-NEC when it pays an independent contractor $600 or more in nonemployee compensation during the calendar year. The IRS requires reporting these payments to ensure proper income tax and self-employment tax compliance.
Can Form 1099-NEC be filed electronically through the IRS Intake System?
Yes, businesses can file Form 1099-NEC electronically through the IRS IRIS Intake System. Filing electronically helps ensure accuracy, meets the tax filing deadline, and reduces processing errors compared to submitting a paper copy.
What is the filing deadline for Form 1099-NEC in 2024?
The tax filing deadline for Form 1099-NEC is January 31, 2025. If this date falls on a weekend or holiday, the next business day becomes the due date for reporting payments to independent contractors.
What happens if a contractor does not provide a Social Security Number?
If a contractor fails to provide a Social Security Number on Form W-9, the payer must withhold 24% federal income tax. The business still must file Form 1099-NEC with the available information to remain compliant with IRS reporting requirements.
How are self-employed individuals subject to self-employment taxes?
Self-employed individuals report payments received on their individual tax return and pay self-employment taxes. These include Social Security and Medicare taxes based on the total amount of compensation paid and taxable income earned during the tax year.
What is the difference between Form 1099-NEC and Form 1099-MISC?
Form 1099-NEC reports nonemployee compensation, while Form 1099-MISC covers other types of compensation, such as rent paid, prizes, or royalties. Businesses hired for services must use Form 1099-NEC to report payments for work performed during the calendar year.For more resources on filing or understanding prior-year IRS forms, visit our Form Summaries and Guides Library or see our IRS assistance guide.
