To fill out Form 1099-NEC for a subcontractor, get a completed Form W-9 from them, total everything you paid them during the calendar year for business services, and transfer that information onto the form: your name, address, and EIN on the left; the contractor’s name, address, and TIN on the right; the yearly total in Box 1. Then send Copy A to the IRS, Copy B and Copy 2 to the contractor, and keep Copy C. The deadline for both is January 31.
Before you start filling anything in, confirm the contractor actually needs a form. For payments made during 2025 (filed in early 2026), you owe a 1099-NEC if you paid a contractor $600 or more for services in the course of your trade or business. For payments made during 2026, the threshold jumps to $2,000, with inflation adjustments starting in 2027.1Office of the Law Revision Counsel. 26 U.S. Code 6041 – Information at Source Personal payments don’t count, no matter how large. A kitchen remodel at your house doesn’t require a 1099-NEC to the contractor; a kitchen remodel at your restaurant does.2Internal Revenue Service. Reporting Payments to Independent Contractors
Who Doesn’t Get a 1099-NEC
Some payments over the threshold still don’t require a form:
- Payments to a C-corporation or S-corporation, including an LLC taxed as one. The exception to this exception: payments to attorneys for legal services must always be reported on a 1099-NEC, even if the law firm is incorporated.3Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
- Payments routed through a third-party settlement organization like PayPal, Venmo, or a credit card processor. Those get reported by the platform on Form 1099-K, and you don’t duplicate them with a 1099-NEC.4Internal Revenue Service. Understanding Your Form 1099-K
- Rent, prizes, and other non-service payments. Those go on Form 1099-MISC.5Internal Revenue Service. About Form 1099-MISC, Miscellaneous Information
What You Need Before You Fill Anything In
Two things: a signed W-9 from the contractor and an accurate total of what you paid them.
Form W-9 gives you the contractor’s legal name, business name, address, entity type, and Taxpayer Identification Number, which is either a Social Security Number, an ITIN, or an EIN depending on how the contractor is set up.6Internal Revenue Service. Forms and Associated Taxes for Independent Contractors Get the W-9 before you cut the first check. If a contractor won’t provide a TIN, or provides one the IRS flags as wrong, you’re required to withhold 24% of every payment and remit it as backup withholding.7Internal Revenue Service. Backup Withholding
You can verify names and TINs before filing through the IRS TIN Matching tool in e-Services. It handles up to 25 combinations at a time interactively, or up to 100,000 in bulk within 24 hours.8Internal Revenue Service. Taxpayer Identification Number (TIN) Matching Tools Registration for e-Services access is required first. A quick match now saves you from a CP2100 notice later.
For the payment total, keep a running ledger of everything you paid each contractor across the year: checks, direct deposits, and any non-cash compensation. Reconcile it against your bank records before you file. The number in Box 1 has to be exact.
Filling Out Form 1099-NEC Box by Box
The form has two identification sections at the top and seven numbered boxes below.9Internal Revenue Service. About Form 1099-NEC, Nonemployee Compensation
Payer and Recipient Information
Upper left: your legal business name, address, and EIN, entered exactly as they appear on your IRS registration.
Upper right: the contractor’s legal name, business name (if different), address, and TIN, pulled directly from their W-9. Copy from the W-9 character by character. Name-and-TIN mismatches are the single most common error that triggers IRS notices, and they carry the same penalty as filing late if you don’t resolve them.
The Numbered Boxes
- Box 1, Nonemployee Compensation. Enter the total you paid the contractor during the calendar year. This is the box that matters for almost every subcontractor filing.10Internal Revenue Service. Form 1099-NEC and Independent Contractors
- Box 2, Direct sales. Only used for direct sales of $5,000 or more of consumer products for resale. Leave it blank for ordinary subcontractor work.
- Box 3. Reserved. Leave blank.
- Box 4, Federal income tax withheld. If you performed backup withholding because the contractor didn’t supply a valid TIN, enter the total withheld here. Otherwise leave it blank.11Internal Revenue Service. Topic No. 307, Backup Withholding
- Box 5, State tax withheld. If your state required you to withhold income tax from the contractor’s pay, enter the amount here.
- Box 6, State/Payer’s state number. Your state tax ID.
- Box 7, State income. Usually the same figure as Box 1.
Which Copy Goes Where
The 1099-NEC prints as a multi-part set:
- Copy A to the IRS.
- Copy B to the contractor for their federal return.
- Copy 2 to the contractor for their state return.
- Copy C stays in your records with the contractor’s W-9 and your payment ledger. The IRS recommends keeping employment tax records at least four years.12Internal Revenue Service. Employment Tax Recordkeeping
If you’re paper filing, Copy A has to be the official red-ink scannable version. You can’t print a working Copy A from the IRS website; order it from the IRS or generate it through tax software. E-filers skip this problem entirely since there’s no physical Copy A to submit.
You can deliver Copy B and Copy 2 to the contractor by mail or electronically. Electronic delivery is allowed only with the contractor’s affirmative consent and comes with detailed disclosure requirements about hardware, software, and how long the statement stays accessible.13Internal Revenue Service. Requirements for Furnishing Information Returns Electronically For most small businesses, mailing is simpler.
Filing With the IRS
You have two paths: electronic or paper.
If you file 10 or more information returns of any type during the calendar year, e-filing is mandatory. The 10-return count is an aggregate across all types, including W-2s, so it doesn’t take many contractors and employees combined to trigger the rule.14Internal Revenue Service. E-File Information Returns
The IRS runs a free e-filing portal called IRIS (Information Returns Intake System) that accepts up to 100 returns entered manually or larger batches via CSV upload. IRIS also generates payee copies you can download for distribution.15Internal Revenue Service. E-File Information Returns With IRIS The older FIRE system is still available for the 2025 filing season but is scheduled for retirement after the 2026 season, so new filers should start on IRIS.16Internal Revenue Service. Filing Information Returns Electronically (FIRE) E-filing through either system eliminates the need for red-ink Copy A and Form 1096.
If you file fewer than 10 returns and choose paper, you need the red-ink Copy A plus Form 1096, a transmittal cover sheet summarizing the total number of 1099s you’re submitting under your EIN.17Internal Revenue Service. Form 1096 – Annual Summary and Transmittal of U.S. Information Returns Form 1096 also has to be the official scannable version.
The Deadline
The 1099-NEC has one unified deadline. Copy A to the IRS and Copies B and 2 to the contractor are all due by January 31 following the end of the calendar year. For 2025 forms, January 31, 2026 lands on a Saturday, so the deadline moves to Monday, February 2, 2026.
There is no automatic extension. You can request a single 30-day extension by filing Form 8809 on paper with a signed written justification, but the IRS grants these nonautomatic extensions only in limited circumstances.18Internal Revenue Service. About Form 8809, Application for Extension of Time to File Information Returns Plan on meeting the January 31 date.
Fixing a Mistake After Filing
If you catch an error after submitting, file a corrected return. For paper corrections, follow Part H of the General Instructions for Certain Information Returns. Do not check the “VOID” box on a correction. That tells IRS scanners to ignore the form, so your fix never gets processed.19Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC Electronic corrections go through IRIS or FIRE the same way as originals.
The usual culprits are wrong TINs, misspelled names, and incorrect payment totals. Fix them yourself rather than wait for a CP2100 or CP2100A notice, because unresolved mismatches draw the same penalty as filing late.
Penalties
Penalties apply per form, and they escalate the longer you wait. For returns due in 2026:20Internal Revenue Service. Information Return Penalties
- Filed within 30 days of the deadline: $60 per form.
- Filed 31 days late through August 1: $130 per form.
- Filed after August 1, or not filed at all: $340 per form.
- Intentional disregard: $680 per form, with no maximum cap.
Twenty missed contractors at the top of the standard schedule is $6,800. The same schedule applies separately to payee statements you fail to furnish to contractors on time, so a single missed deadline can double the penalty exposure. Small businesses with average annual gross receipts of $5 million or less get lower aggregate caps, but the per-form amounts don’t change.
State Filing
Many states require their own copy of the 1099-NEC. If you e-file federally, you may be able to satisfy the state obligation through the Combined Federal/State Filing Program, which forwards your data to participating states.21Internal Revenue Service. Topic No. 804, FIRE System Test Files and Combined Federal/State Filing (CF/SF) Program Not every state participates, and some participating states still require a separate notification. Check your state tax agency before assuming your federal filing takes care of it. Boxes 5 through 7 on the form exist for state reporting; fill them in if your state requires withholding on contractor payments.