To file a 1099-NEC for an independent contractor, collect a completed Form W-9 from the contractor, add up everything you paid them by check, cash, ACH, or wire during the calendar year, and if the total reaches $2,000 or more, report that figure in Box 1 of Form 1099-NEC.1Internal Revenue Service. Form 1099-NEC and Independent Contractors Copy A goes to the IRS and Copy B goes to the contractor, both due January 31. The $2,000 threshold is new for payments made in 2026, up from the longstanding $600 floor.
Who You Need to File For
Four conditions all have to be true. The person isn’t your employee, you paid them for services in the course of your trade or business, they’re an individual or an eligible entity type, and total payments for the year reached $2,000 or more.2Internal Revenue Service. Reporting Payments to Independent Contractors
The threshold is cumulative across the year. Pay someone $500 in March and $1,600 in October, and the combined $2,100 triggers a filing. Beginning in 2027 the $2,000 amount will adjust annually for inflation.
Entity type matters. You generally file for individuals, sole proprietors, partnerships, and most LLCs. Corporations, including LLCs that elected C-corp or S-corp taxation, are usually exempt.3Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC The W-9 you collect tells you the entity classification, so you don’t have to guess. One notable exception to the corporate rule: legal fees paid to a law firm are reported on a 1099-NEC even if the firm is a corporation.
Payments That Don’t Get Reported
Personal payments are out entirely. Paying someone to remodel your kitchen, tutor your kids, or mow your lawn doesn’t trigger a filing because it isn’t a trade-or-business payment.
Payments made by credit card, debit card, or through third-party networks like PayPal or Venmo are also excluded. The payment processor reports those on Form 1099-K, so putting them on a 1099-NEC would duplicate the reporting.3Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC This catches many business owners off guard. If you paid a contractor $3,000 for the year but every payment went through a credit card, you don’t file a 1099-NEC for that contractor at all. Only report what you paid by check, cash, ACH, or wire.
Getting a W-9 From Each Contractor
Request a completed Form W-9 before you issue the first payment. The W-9 captures the contractor’s legal name, any business or DBA name, taxpayer identification number (either an SSN or an EIN), entity classification, and mailing address.4Internal Revenue Service. Form W-9 – Request for Taxpayer Identification Number and Certification Keep the W-9 on file for at least four years.5Internal Revenue Service. Forms and Associated Taxes for Independent Contractors
Getting the W-9 upfront is the single best thing you can do to keep January calm. Chasing tax IDs the week before the deadline is where most of the stress in this process comes from.
If a contractor refuses or ignores your request, you must begin backup withholding at 24% on all payments to that person and remit the withheld amount to the IRS.6Internal Revenue Service. Backup Withholding Make up to three documented attempts to get the TIN. A missing TIN doesn’t excuse you from filing the 1099-NEC. File it with a note that the contractor failed to provide the information.
Before submitting, use the IRS’s free TIN Matching service to verify each name-and-TIN combination. You can check them one at a time or upload a bulk file.7Internal Revenue Service. Taxpayer Identification Number (TIN) Matching A mismatch on a filed 1099-NEC can trigger a backup withholding notice, so catching errors first saves everyone the follow-up.
Filling Out the Form
Box 1 holds the total gross payments made to the contractor during the calendar year.8Internal Revenue Service. Form 1099-NEC Include fees, commissions, prizes for services, and any other compensation. If the contractor supplied parts or materials as part of the service and furnishing those materials was incidental to the work, include their cost in the total. The classic case: an auto repair shop bills you separately for labor and parts, but because supplying the parts was part of the repair, the whole amount gets reported.
Travel reimbursements work the same way when the contractor didn’t account to you for the expenses. A flat fee that bundles travel without receipts goes in Box 1 in its entirety.9Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
Enter your own federal employer identification number and business address in the payer fields. The payer’s TIN cannot be truncated on the form.
Submitting Copy A to the IRS
If your business files 10 or more information returns of any type during the year, you must file electronically. That threshold combines all information returns across every form type, not just 1099-NECs.10Internal Revenue Service. General Instructions for Certain Information Returns Between contractor 1099-NECs and a couple of 1099-INTs from a bank, small businesses hit 10 quickly.
Filing Electronically
The IRIS Taxpayer Portal is a free, web-based tool where you can manually enter up to 100 returns at a time or upload them via CSV. You can also download payee copies and keep records of what you filed.11Internal Revenue Service. E-File Information Returns With IRIS Using IRIS requires a five-digit IRIS Transmitter Control Code, which you apply for on the IRS website. For most small businesses, IRIS is the simplest path.
The older FIRE (Filing Information Returns Electronically) system requires formatting data to IRS Publication 1220 specifications and is typically used by high-volume filers or through third-party software. Both systems provide confirmation of receipt; save it as proof of timely filing.
Filing on Paper
Businesses that file fewer than 10 information returns may still use paper. Include Form 1096 as a cover sheet summarizing the number of 1099-NECs and the total dollar amount. Paper forms go to one of three IRS processing centers based on your business location; Form 1096 lists the correct address.12Internal Revenue Service. Form 1096 – Annual Summary and Transmittal of U.S. Information Returns
One catch: the Copy A you send to the IRS must be an official scannable form. Order it from the IRS or an authorized retailer.13Internal Revenue Service. Order Paper Information Returns and Employer Returns Do not print Copy A on a regular office printer. Copies B (for the contractor) and C (for your files) can come from the fillable PDFs the IRS posts.
Getting Copy B to the Contractor
Send Copy B by first-class mail, or deliver it electronically if the contractor has given affirmative consent beforehand. The consent must be given electronically in a way that proves the recipient can access the document in the format you’ll provide. Before consenting, they need to be told about their right to a paper copy, how to withdraw consent, and the hardware or software required to view the statement.10Internal Revenue Service. General Instructions for Certain Information Returns Emailing a PDF without that process isn’t valid electronic delivery.
Deadlines and Extensions
Copy B to the contractor and Copy A to the IRS are both due January 31. When that date falls on a weekend or federal holiday, the deadline shifts to the next business day.14Internal Revenue Service. Publication 1099 – General Instructions for Certain Information Returns (2026) For the 2025 tax year, January 31, 2026, is a Saturday, so the actual deadline is Monday, February 2, 2026. If you mail paper forms, the postmark date is what counts.
Extensions are hard to get for the 1099-NEC. Unlike most other information returns, the extension isn’t automatic. File a paper Form 8809 by the original due date with a signed justification explaining why you need more time, and even then you get only a single 30-day extension.15Internal Revenue Service. Form 8809 – Application for Extension of Time to File Information Returns Acceptable reasons include a federally declared disaster, serious illness of the person responsible for filing, or not receiving payee information in time. An approved extension only extends the IRS filing deadline. It does not buy extra time for getting Copy B to the contractor.
Penalties for Filing Late
The IRS assesses separate penalties for filing late with the agency and for failing to furnish the form to the contractor on time. For returns due in 2026, the per-form penalties are:16Internal Revenue Service. Information Return Penalties
- Up to 30 days late: $60 per form
- 31 days late through August 1: $130 per form
- After August 1 or never filed: $340 per form
- Intentional disregard: $680 per form with no annual cap
The penalties apply separately for each form, so missing 20 contractor filings can run into thousands. Small businesses with average annual gross receipts of $5 million or less have lower annual caps on the first three tiers, but the intentional disregard penalty has no ceiling for any business. Filing a day late is much better than not filing, given the jump between the first tier and the third.
Fixing a 1099-NEC After You File
If you find an error after submitting to the IRS, file a corrected version rather than starting over. Understand the two checkboxes at the top of the form: VOID and CORRECTED.10Internal Revenue Service. General Instructions for Certain Information Returns
Mark VOID only on forms that were prepared incorrectly and haven’t yet been submitted. If you spot a typo while printing a batch, void the bad one and prepare a fresh copy without checking CORRECTED. The CORRECTED box is exclusively for forms the IRS has already received and processed. Filing a paper correction with the VOID box checked is a common mistake that causes the IRS scanner to skip the form, so the fix never lands in the system.
For electronic corrections, the process depends on the system you used. IRIS, FIRE, and the Application-to-Application system each have their own correction procedures in the relevant IRS publications. Send a corrected Copy B to the contractor as well.
State Filing
Many states require you to file 1099-NEC data with their tax agencies too. The IRS Combined Federal/State Filing Program is the easiest handling: if you e-file through FIRE and participate, the IRS forwards your data to participating states at no extra cost.17Internal Revenue Service. Topic No. 804 – FIRE System Test Files and Combined Federal/State Filing Program Not every state participates, and some participating states still want separate notification. A handful set their own reporting thresholds or add requirements beyond the federal ones. Check with your state tax agency, particularly if you have contractors working in multiple states.
What Doesn’t Belong on a 1099-NEC
Nonresident aliens who perform services in the United States aren’t reported on a 1099-NEC. Those payments go on Form 1042-S.2Internal Revenue Service. Reporting Payments to Independent Contractors Instead of a W-9, you collect a Form W-8BEN (for individuals) or W-8BEN-E (for foreign entities) to certify foreign status.18Internal Revenue Service. Form W-8BEN – Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting Payments to foreign contractors are subject to a default 30% withholding on the gross amount, though a tax treaty with the contractor’s home country may reduce or eliminate it.19Internal Revenue Service. Withholding and Reporting of Income Tax on Non-Wage Payments to Foreign Persons This is a different filing and withholding system than domestic contractor payments; if you regularly hire overseas, IRS Publication 515 has the full withholding rules.
Keeping the Records
Keep copies of every filed 1099-NEC for at least three years from the filing date.20Internal Revenue Service. How Long Should I Keep Records Retain W-9 forms for four years. In practice, holding onto both for four years is the simpler approach and gives you everything you need if the IRS sends questions.