If you pay independent contractors you may need to file Form 1099-NEC to report payments made. 1099-NECs need to be filed and sent to your contractors by January 31. Keep reading to learn who needs a 1099-NEC and how to file your 1099-NECs.
Who needs a 1099-NEC
Anyone who meets all of the following requirements:
- They were hired as an independent contractor. You don’t need to issue a 1099 to a Corporation or a S Corp, unless it’s a payment for legal services.
- They provided services to your business.
- They were not employees of your business.
- You paid them $600 or more, including commissions and/or referral fees paid.
Who doesn’t need a 1099-NEC
Contractors paid via credit credit or third-party payment processor
If you paid your contractors using a credit card, debit card, or through a third-party payment processor like Paypal or Stripe, you won't need to create a 1099-NEC. Many payment processors issue a 1099-K, but check with your contractor.
Contractors paid through Fiverr or Upwork
Many freelance marketplaces issue the 1099s for you. You’ll want to check with your specific vendor to ensure your contractors’ forms are taken care of.
Filing 1099-NECs with Collective
If you paid your contractors through Gusto or Collective Payroll, we will generate your 1099-NECs and you’ll have access to them in your Collective Dashboard beginning on January 23. You’ll need to mail the 1099-NECs to your contractors by January 31.
Here’s how to access your 1099-NECs:
- Log in to your Collective Dashboard
- Navigate to Payroll.
- Navigate to the Signatory & Company Documents section.
- Click on the document named Form 1099:2024. This will download a packet of your 1099s.
You can also access your 1099s through your Document Center by sorting by 1099 Document type. Your files will be named with the following structure: contractor-name-<LLC>-2024-1099.pdf
You cannot download and email the 1099s to your contractors – if they’ve opted in to receive their 1099-NECs digitally, you’ll need to use 256-bit encryption to send. Some tools that can help you with that encryption include axcrypt.net and NordLocker.com.
Filing 1099-NECs without Collective
If you didn’t use Gusto or Collective Payroll to pay your contractors you’ll need to generate 1099-NECs for these contractors.
Here are the steps to follow:
- Collect a W-9 from your contractor – this will tell you the legal name, address, and taxpayer identification number (TIN) or Social Security number (SSN) of the contractor. You’ll need this to file the 1099-NEC.
- Calculate the total amount you paid the contractor in the previous tax year. This total should only include payments directly to the contractor – any payments made using a credit or debit card or via a third-party payment process will be covered by a 1099-K issued by the payment processor.
- Use an online filing service to generate the 1099-NECs. Sites like tax1099.com and 1099online.com are easy to use and e-file your 1099-NECs for a fee.
Be sure to file and send your contractors their 1099-NECs by the January 31 deadline.