1099-NEC (Nonemployee Compensation)

Form 1099-NEC reports payments of $600 or more made to independent contractors during a calendar year. The form was reintroduced in 2020 to separate non-employee compensation from other 1099 income reported on Form 1099-MISC.

Businesses must file 1099-NECs by January 31 each year, both with the IRS and with the recipient. Penalties apply for late or incorrect filings — escalating from $60 per form for a few days late to $310+ per form if issued after August, and $660+ per form for intentional disregard.

The corporate exemption is the most-misapplied rule. Payments to C-corps and S-corps generally do NOT require 1099-NEC, with three sharp exceptions: attorney fees (issued regardless of entity type), fish purchases, and medical/health-care payments. Businesses that skip the exception on legal fees get audited more often than any other 1099 rule.

For businesses that hire many contractors — agencies, construction, gig-based service firms — the practical mechanic is a W-9 gate at vendor setup. No W-9 on file, no payment released. This makes the 1099 season a reporting exercise, not a scramble. Backup withholding at 24% applies to payments where the vendor's TIN is missing or invalid; the business is on the hook for the withholding, so setup discipline is real money.

Payment platforms complicate the picture. Contractors paid via Stripe, Square, or PayPal receive a 1099-K from the platform (over the $2,500 2025 threshold, phasing down to $600 by 2027) and the business ISSUING the platform payment should NOT also issue a 1099-NEC — that would double-report. The correct rule: 1099-NEC for check, ACH, wire, and cash payments; 1099-K for payment-processor payments; don't overlap. Getting this wrong invites CP2000 notices to both the contractor and the business.