1099 Prep for Contractors

The 1099-NEC (Non-Employee Compensation) is the form used to report payments to independent contractors. It's required if your business paid a US person $600 or more for services during the calendar year. Who receives a 1099-NEC: • Independent contractors (freelancers, consultants, designers, developers) • Attorneys (legal fees) • Accountants (if not a corporation) • Property managers • Cleaning services (if not a corporation) • Marketing consultants • Anyone paid as a contractor via wire transfer, check, or ACH Who does NOT receive a 1099-NEC: • Employees (they receive a W-2) • C-Corporations and S-Corporations (exempt except for legal services) • Payments via PayPal or credit card — those platforms file the 1099-K themselves • Payments to an LLC taxed as an S-Corp or C-Corp — but you need to verify this via the W-9 • Vendors you bought goods from (not services) Key dates: • January 31 — deadline to send copies to contractors and file with the IRS • February 28 — paper filing deadline (we e-file earlier) • Penalty for late filing — $60 per form (if up to 30 days late), $130 (31-90 days), $310+ (after that) 1099-NEC prep usually begins in January — you need to gather a W-9 from every contractor before you can prepare the forms. It's often a last-minute crunch and we don't have all the W-9s on file — so we end up chasing contractors.