To send Form 1099-NEC to your subcontractor, you must first ensure you meet the filing requirements, prepare the form using their information, and then distribute Copy B to them by the annual deadline. (January 31)
Our bookkeeping services take care of 1099 preparation and filing with the IRS, while ensuring your business and subcontractors receive the appropriate documentation.
Requirements
You generally must issue a Form 1099-NEC if all of the following are met for the tax year:
- You made a payment to someone who is not your employee.
- The payment was for services in the course of your trade or business.
- You made payments totaling $600 or more to an individual, partnership, or LLC not taxed as a corporation.
- The payments were made by cash, check, or ACH transfer (payments made via credit card or third-party payment processors like PayPal or Stripe are generally reported by the processor on Form 1099-K).
Step-by-Step Guide
Collect a Form W-9: Before paying a new subcontractor, you should have them fill out a Form W-9. This form provides their legal name, address, and Taxpayer Identification Number (TIN), which are necessary for accurately completing the 1099 form. Keep this form in your records for at least four years.
Complete Form 1099-NEC: Use the information from their W-9 and your payment records to complete Form 1099-NEC. Key boxes to fill in include:
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- Payer’s information: Your business name, address, and EIN.
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- Recipient’s information: The subcontractor’s name, address, and TIN (usually an SSN or EIN).
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- Box 1 (Nonemployee Compensation): The total amount you paid them during the year for services.
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- Box 4 (Federal Income Tax Withheld): Any backup withholding you may have collected (this is required if they didn’t provide a correct TIN).
- Distribute and File: The deadline to send the form to the subcontractor (Copy B and Copy 2, if applicable) and file Copy A with the IRS is January 31 of the following year (or the next business day if it falls on a weekend or legal holiday).
