Form 1099-NEC (Nonemployee Compensation) reports payments you made in the course of your business to people who aren’t your employees — contractors, freelancers, gig workers, and unincorporated vendors. Through tax year 2025 the reporting threshold is $600; beginning tax year 2026 it rises to $2,000 (and is indexed after that). The deadline is unusual: January 31 for both the recipient copy and the IRS copy. You file it electronically through IRIS.
In this story
What Form 1099-NEC Actually Reports
Form 1099-NEC exists to tell the IRS one thing: your business paid someone who isn’t on your payroll, and here is how much. That’s it. The recipient uses it to report self-employment income; the IRS uses it to make sure they do.
The form came back in 2020 after a long absence. For years, nonemployee compensation lived in Box 7 of Form 1099-MISC, but the two forms had different deadlines and the mismatch caused constant headaches. The IRS split nonemployee pay back out onto its own form, and now the two returns do different jobs. If you’re paying for services from someone who works for themselves, you’re almost always on the NEC.
Four conditions have to line up before a payment lands on a 1099-NEC. You made it to someone who isn’t your employee. You made it for services in the course of your trade or business (personal payments don’t count). You paid an individual, partnership, estate, or in some cases a corporation. And the total for the year hit the reporting threshold.
Who Has to File a 1099-NEC
If you run a business — a sole proprietorship, an LLC, a partnership, a corporation, a nonprofit, even a rental operation that rises to the level of a trade or business — and you paid a nonemployee for services, you’re the filer. The person you paid is the recipient. Personal payments never trigger a 1099-NEC. Pay a neighbor’s kid to mow your own lawn and there’s nothing to file; pay that same kid to mow the lawn at your rental property and you might.
The classic case: attorneys’ fees for services go in Box 1 of the NEC. But watch the difference between fees and gross proceeds. If you pay a law firm $5,000 for legal work, that’s NEC Box 1. If you pay $50,000 into a settlement that a lawyer receives on a client’s behalf, that’s gross proceeds to an attorney and belongs in Box 10 of the 1099-MISC instead. People mix these up constantly.
Payments to corporations are generally exempt from 1099 reporting — but not always. Attorneys’ fees are reportable even when the firm is incorporated. Don’t skip a law firm’s 1099-NEC just because it’s a P.C. Get a Form W-9 up front so you know the vendor’s entity type and TIN before you cut the first check.
The Threshold Is Changing: $600 → $2,000 for TY2026
For as long as most filers can remember, the number was $600. Pay a contractor $600 or more in a year and you file. That’s still the rule for tax year 2025 returns you file in early 2026.
Legislation enacted in 2025 raised the 1099-NEC and 1099-MISC filing threshold from $600 to $2,000, effective for payments made in tax year 2026, with the amount indexed for inflation in later years. So the returns you file in early 2027 for 2026 payments use the higher floor. A contractor you paid $1,500 in 2025 gets a 1099-NEC; the same $1,500 in 2026 wouldn’t require one under the new threshold.
| Tax year | Filing threshold | Returns filed |
|---|---|---|
| TY2025 | $600 | Early 2026 |
| TY2026 | $2,000 (indexed after) | Early 2027 |
Thresholds have moved a lot lately, and effective dates and indexing can shift with further guidance. Treat $2,000 as the figure reported at publication for TY2026, and confirm the current-year amount in the IRS instructions before you decide not to file for a given vendor. Over-filing is annoying; under-filing gets penalized.
One thing that doesn’t change: backup withholding. If you withheld federal income tax under the backup withholding rules — because a payee didn’t give you a valid TIN, for instance — you file a 1099-NEC regardless of the dollar amount. A $50 payment with $14 of backup withholding still gets a form.
Form 1099-NEC, Box by Box
The NEC is a short form — one real dollar box and a handful of supporting fields. Most filers only ever touch Box 1. Here’s what each box carries.
| Box | What goes in it |
|---|---|
| Box 1 — Nonemployee compensation | The total you paid the recipient for services during the year. This is the box that matters for almost every filer. |
| Box 2 — Direct sales checkbox | Check it if you made direct sales of $5,000 or more of consumer products to the recipient for resale. This can be reported here or on 1099-MISC Box 7 — not both. |
| Box 3 — Reserved | Currently blank. Leave it alone. |
| Box 4 — Federal income tax withheld | Backup withholding you took out — typically 24% when a payee failed TIN requirements. |
| Box 5 — State tax withheld | Any state income tax you withheld. Boxes 5–7 support state and combined federal/state filing. |
| Box 6 — State/Payer's state no. | Your state and state payer identification number. |
| Box 7 — State income | The amount of state income to report, if different from the federal figure. |
Notice what’s not here: no separate boxes for rents, royalties, or medical payments. Those live on the 1099-MISC. If you find yourself wishing the NEC had a box for the payment you’re trying to report, that’s usually a sign it belongs on a different form.
Contractor or Employee? Get This Right First
Before you can file a 1099-NEC, you have to be sure the person is actually a contractor and not an employee you should have put on a W-2. Misclassification is where the real money and the real penalties live.
The IRS looks at the relationship through three lenses, and no single factor decides it. Behavioral control: do you direct how the work gets done, or just what the result should be? Financial control: does the worker have unreimbursed expenses, their own tools, a real chance of profit or loss, and other clients? Type of relationship: is there a written contract, are benefits involved, is the arrangement ongoing and central to your business?
A web designer who works from her own laptop, sets her own hours, invoices you for a project, and has six other clients is a contractor — she gets a 1099-NEC. A “contractor” who shows up at your office every day at 9, uses your equipment, follows your minute-to-minute direction, and has no other clients looks a lot like an employee, and calling him a contractor won’t make him one.
The common mistake is treating a de facto employee as a contractor to skip payroll taxes. If the IRS reclassifies the worker, you can owe back employment taxes, interest, and penalties. When it’s genuinely close, that’s a question for your CPA before payday, not after you’ve filed the wrong form.
The Deadline That Trips People Up: January 31
Here’s the part that catches filers who are used to other 1099s. For the 1099-NEC, both copies are due January 31 — the copy you furnish to the recipient and the copy you file with the IRS. There’s no later March deadline for the IRS copy like there is with most other 1099 forms.
That single accelerated date is exactly why the IRS pulled nonemployee comp off the 1099-MISC in the first place. On the MISC, most boxes give you until the end of February (paper) or the end of March (e-file) to reach the IRS. The NEC gives you neither. Everything is January 31.
If January 31 falls on a Saturday, Sunday, or legal holiday, the deadline moves to the next business day. That’s the only breathing room the calendar gives you — don’t plan around it.
Miss it and the penalties scale with how late you are and how big your business is. File a little late and it’s a smaller per-form amount; blow past August and it climbs; ignore it entirely and intentional-disregard penalties are far steeper. We break the numbers down in our 1099 late-filing penalties guide.
How to E-File a 1099-NEC Through IRIS
Paper filing is fading fast. The electronic-filing threshold now catches almost everyone: if you file 10 or more information returns of any type in a year, counted in aggregate, you must e-file. IRIS is the IRS system that handles it.
Collect a W-9 from every payee
Before you pay anyone, get a signed Form W-9 with their legal name, TIN, and entity type. This is what feeds the recipient block on the NEC and what protects you if a TIN turns out to be wrong.
before paydayTotal each payee for the year
Add up everything you paid each nonemployee for services. Compare the total to the current-year threshold and flag anyone at or above it (plus anyone you backup-withheld on, regardless of amount).
JanuaryBuild the return data
Put the year’s total in Box 1, add any backup withholding in Box 4, and fill the state boxes if you withheld state tax or you’re filing combined federal/state.
5 min eachConvert to IRIS XML and validate
IRIS accepts returns as XML. With e1099f you upload the file you already produce — even a legacy FIRE/Pub-1220 file — and it’s converted to validated IRIS XML for you, checked against the IRS business rules first.
automaticTransmit and furnish by January 31
Send the IRS copy through IRIS and get your Receipt ID, and deliver the recipient copy by mail or online access. Both by January 31.
deadlineThe one credential you need to file directly through IRIS is a Transmitter Control Code (TCC), and getting one has historically meant an application and a wait. Filing through e1099f, you don’t apply for your own — there’s no new TCC and no 45-day wait.
Filing a stack of 1099-NECs this January?
Upload your existing file, we convert it to validated IRIS XML and file it — no new TCC, no 45-day wait.
The Mistakes That Cause Rejections and Notices
The two errors that generate the most IRS notices are both avoidable. First, a name/TIN mismatch — the recipient’s name and taxpayer ID don’t match IRS records. This is why the W-9 (and TIN matching) matters; a mismatch can trigger a CP2100 notice and backup-withholding obligations. Second, putting the payment on the wrong form — NEC vs. MISC, or fees vs. gross proceeds to an attorney.
TIN checked
Name/TIN matching runs before we file, so mismatches surface before the IRS sees them.
Your file in
Upload the FIRE-format or CSV file you already produce — we handle the IRIS XML.
One-and-done
IRS copy transmitted and recipient copies furnished from the same run, ahead of January 31.
A Receipt ID from the IRS — not a rejection — for every 1099-NEC you send.
Frequently Asked Questions
What is the 1099-NEC filing threshold for 2026?
When is Form 1099-NEC due?
What is the difference between 1099-NEC and 1099-MISC?
Do I file a 1099-NEC for payments to a corporation?
Do I need a 1099-NEC if I withheld backup withholding?
Do I have to e-file the 1099-NEC?
Where do attorneys' fees go — NEC or MISC?
Not tax advice. This guide is general information for filers and may not reflect the latest IRS rules; thresholds and amounts change. Confirm current-year requirements with the IRS or a tax professional before you file.