What is Form 1099-NEC?

How it works

A US payer who pays $600 or more in a calendar year for services performed by a US person — independent contractor, freelancer, single-member LLC, partnership — must issue a 1099-NEC. The 1099 series is the residents' parallel to 1042-S: same purpose (information reporting on payments to outside parties), different audience (US persons only).

The deadlines are tighter than most IRS forms: the recipient and the IRS both get their copy by 31 January of the year following the payment year. There is no automatic extension.

A US payer collects the recipient's TIN ahead of payment via Form W-9. Without a valid W-9, the payer must apply 24% backup withholding on the gross payment until one is received. For non-US payees, the equivalent collection forms are W-8BEN (individuals) and W-8BEN-E (entities), and the reporting form is Form 1042-S — never 1099-NEC.

Who gets one and who doesn't

Issued to: US individuals, US single-member LLCs (in the owner's name), US partnerships, US LLCs taxed as partnerships, and attorneys regardless of entity type — even if the law firm is a corporation.

Exempt: US C corporations and S corporations (with the legal-fees exception above), payments routed through credit cards or third-party networks (PayPal, Stripe — those are reported on 1099-K by the processor instead), payments under the $600 threshold, and any non-US recipient.

Examples

• US LLC freelancer paid $25,000 by a US client. A single-member LLC owned by a US citizen receives $25,000 in design fees. The client issues a 1099-NEC for $25,000 in the LLC owner's name (the entity is disregarded). The freelancer reports the income on Schedule C of Form 1040 and pays self-employment tax on the net.
• Foreign founder's US LLC paid $25,000. Same scenario, but the LLC is owned by a French resident. The client should collect W-8BEN-E, not W-9, and issue 1042-S, not 1099-NEC. If the LLC has no US trade or business, the income is foreign-source for the owner and not subject to US tax — but the client may still be on the hook for the form if no W-8 was collected.

Common mistakes

• Treating the LLC as a separate taxpayer. A single-member LLC owned by a US person is disregarded for federal tax — the W-9 and the 1099-NEC are issued in the owner's name and SSN/EIN, not the LLC's EIN.
• Forgetting the legal-fees exception. Payments to attorneys go on 1099-NEC even if the law firm is a corporation. This is one of the few entity-type exceptions in the rules.
• Assuming Stripe / PayPal handles it. Third-party network payments above the 1099-K threshold are reported by the processor — but if you also paid the same vendor by direct ACH or check, those count toward your 1099-NEC threshold separately, and the vendor may end up with both forms covering different segments.
• Skipping backup withholding when no W-9 is on file. Default is 24% backup withholding. The IRS pursues the payer, not the payee, for missed deposits.