What is a 1099-NEC form?

The 1099-NEC is a tax information form that is generally used to report non-employee compensation.

Who files a 1099-NEC form?

The company or business owner that makes payments to the service provider or contractor for their services is required to report those payments to the IRS and also send a copy to the service provider or contractor.

Many businesses that have previously filed the 1099-MISC to report non-employee compensation in Box 7 will use the 1099-NEC starting this tax year.

Who receives a 1099-NEC form?

The service provider or contractor receives a copy for their records and the IRS also gets a copy – either through electronic filing or a paper copy by post. Typically, companies are only required to send 1099-NECs to service providers or contractors who've been paid US$600 or more in a calendar year and are based in the US or are US taxpayers.

Deadlines

The deadline to report 2023 tax forms to the IRS through Stripe 1099 is 25 January 2024. This will ensure that the forms are filed with the IRS and a copy is sent to the recipients before the IRS deadline of 31 January 2024.

State filing considerations for 1099-NEC

Form 1099-NEC is included in the IRS 1099 Combined Federal/State Filing (CF/SF) Program. However, states may still require these tax forms to be reported directly. States should confirm whether using the CF/SF Program to share Form 1099-NEC information will satisfy their reporting requirements. We recommend consulting a tax advisor to determine your state filing requirements.

Posting vs e-filing 1099-NECs with the IRS

Anyone issuing more than 250 forms is required to e-file with the IRS. Even if fewer than 250 forms are being filed, the IRS does actually prefer e-filing.

Penalties

IRS penalties ranging from US$50 to US$290 per form may apply for each instance where you:

• Don't file an information return with the IRS by the deadline
• Don't provide the recipient with a statement by the deadline
• Don't report a Taxpayer ID (TIN)
• Report an incorrect TIN
• Report incorrect information
• Don't provide the recipient with all the required information
• Don't e-file with the IRS when required to e-file

Larger penalties may be enforced where there is evidence of intentional disregard or neglect.

This article is neither legal advice nor tax advice. We recommend that you speak to your tax advisor if you have any questions or concerns related to tax reporting.