What a 1099-NEC is and when you need it
If your US company paid an independent contractor for work this year, you may owe that person and the IRS a Form 1099-NEC. The “NEC” stands for nonemployee compensation, and the form exists so the IRS can match the income a contractor reports to the payments a business actually made.
This is the practical, step-by-step version. We walk the five things a US company does to issue a 1099-NEC to a US contractor, in order, with the IRS rules cited so you can confirm each one yourself. A quick note before we start. This is general information, not tax or legal advice. Filing obligations turn on the facts of your situation, so confirm the specifics with a qualified tax professional before you file.
Step 1: Collect a Form W-9 before you pay
The first step happens before any money moves. Have the contractor complete a Form W-9, which captures two things you cannot file without: their legal name and their taxpayer identification number.
The IRS Instructions for Forms 1099-MISC and 1099-NEC point to the W-9 as the mechanism for obtaining a payee’s TIN, noting that to report certain payments “you must obtain the attorney’s TIN. You may use Form W-9 to obtain the attorney’s TIN.” The same logic applies to any contractor: the W-9 is how you get the name and number you will later transcribe onto the 1099-NEC.
Collecting it up front, before the first payment, matters for a second reason. If a contractor does not give you a TIN, you may be required to apply backup withholding to their pay. Getting the W-9 signed at onboarding avoids that and saves you from chasing the number in January when the form is due.
Keep the W-9 in your records. You do not file it with the IRS, but it is your documentation for the name and TIN you report.
Step 2: Total the year’s pay and check the threshold
Add up everything you paid the contractor for services during the calendar year. The IRS instructions set the reporting trigger for nonemployee compensation at “At least $600 in: Services performed by someone who is not your employee.” The IRS Instructions for Forms 1099-MISC and 1099-NEC still reflect that $600 figure.
There is a change to flag. Under the One Big Beautiful Bill Act, the reporting threshold for Forms 1099-NEC and 1099-MISC rises from $600 to $2,000. Per RSM, section 70433 of the OBBBA “amends sections 6041(a) and 6041A(a)(2) to raise reporting thresholds for Forms 1099-NEC and 1099-MISC from $600 to $2,000, effective Jan. 1, 2026 and introduces annual inflation indexing beginning in 2027.” So payments made on or after January 1, 2026 use the $2,000 number, while the $600 figure applied to payments made during 2025. Because the IRS instructions page still shows $600, confirm which figure applies to your payment year before you decide whether to file.
If the contractor’s total for the year clears the applicable threshold, you issue a 1099-NEC. If it does not, you generally do not. Either way, note that the threshold counts services, not reimbursed expenses, and not amounts you paid for merchandise.
Step 3: Prepare the Form 1099-NEC
With a W-9 in hand and the total confirmed, fill out the Form 1099-NEC. The core fields are straightforward:
- Your business name, address, and TIN as the payer
- The contractor’s name, address, and TIN, taken straight from the W-9
- The total nonemployee compensation for the year in Box 1
- Any federal income tax withheld, for example backup withholding, in Box 4
Form 1099-NEC has multiple copies. Copy A goes to the IRS, Copy B goes to the contractor, and you keep a copy for your records. Do not download and print Copy A from the website to mail in, because the IRS scannable red-ink version is required for paper filing. If you e-file, the software handles the IRS copy for you.
Accuracy on the name and TIN is what makes the rest of the process smooth. A mismatch between the name and TIN you report and IRS records can trigger a notice, which is the practical payoff for collecting a clean W-9 in step one.
Step 4: Furnish Copy B and file with the IRS by January 31
Form 1099-NEC has one deadline that covers both directions, and it is early. The IRS instructions state that “You are required to furnish the payee statements and file with the IRS by January 31,” and that you “File Form 1099-NEC on or before January 31, using either paper or electronic filing procedures.”
Two parts to land by that date:
- Furnish Copy B to the recipient. Get the contractor their copy by January 31 so they have it for their own return.
- File with the IRS. Submit Copy A, or the electronic equivalent, by January 31.
This is a key difference from Form 1099-MISC. The MISC has a later electronic filing date, February 28 on paper or March 31 electronically per the IRS instructions, but the 1099-NEC does not. For the NEC, January 31 is the date for the recipient copy and the IRS filing alike, whether you file on paper or electronically. Mark it early, because January 31 arrives fast after year end.
Step 5: E-file if you are filing 10 or more returns
Whether you must file electronically depends on volume. The IRS instructions explain that “T.D. 9972, published February 23, 2023, lowered the e-file threshold to 10 (calculated by aggregating all information returns), effective for information returns required to be filed on or after January 1, 2024.”
Read the threshold carefully, because it is aggregated. The count of 10 is not 10 of one form type. It is the total across all the information returns you file in the year, so your 1099-NEC forms, any 1099-MISC, W-2s, and other information returns are summed together. Cross 10 in total and you are required to e-file.
If you are below 10, you may still file on paper, and e-filing remains an option at any volume. Most businesses past a handful of contractors find e-filing through the IRS system or a payroll or filing provider simpler than handling scannable red-ink paper forms anyway.
The foreign contractor exception
One contractor you do not issue a 1099-NEC to is a foreign contractor working abroad. The 1099-NEC reports US-source nonemployee compensation paid to US persons. A contractor outside the US gives you a Form W-8BEN rather than a W-9, and work performed outside the US is foreign-source income that is generally neither withheld on nor reported on a 1099.
So the W-9 versus W-8BEN distinction at onboarding tells you which path you are on. A W-9 puts you on the 1099-NEC track in this guide. A W-8BEN takes the contractor out of it entirely. We cover that full analysis, including when a foreign contractor performs some work inside the US, in do you send a 1099 to foreign contractors.
A quick checklist
For each US contractor you paid this year, run these in order:
- W-9 on file? Legal name and TIN collected before you paid.
- Total clears the threshold? $600 for 2025 payments, $2,000 for payments made on or after January 1, 2026 per RSM, with the IRS page still showing $600.
- Form prepared? Payer info, recipient info from the W-9, Box 1 total, any Box 4 withholding.
- January 31 met? Copy B to the contractor and the IRS filing both by January 31.
- E-file required? Yes if your total information returns for the year hit 10 or more.
Get those five right and the contractor’s 1099-NEC is done correctly and on time.
When a platform handles it for you
A founder paying one or two US contractors can run this by hand. A team paying contractors across the US and abroad is juggling W-9s and W-8BENs, per-contractor totals against a moving threshold, and a hard January 31 deadline, and that is where the manual approach starts to leak.
Omnivoo Contract Management handles the documentation end to end for a flat $49 per finalized contract. We collect the right tax form, run the KYC, draft and manage the contract, and pay your contractors in 150+ countries. Transaction fees are passed through at cost, with no FX markup and no subscription.
Want the right setup for your contractors before filing season? See how Omnivoo Contract Management collects tax forms and manages contractors end to end, or talk to our team.