1099-NEC vs. 1099-MISC
Since 2020, non-employee compensation goes on Form 1099-NEC (not 1099-MISC). Use 1099-NEC for payments to independent contractors, freelancers, and other non-employees for services. Use 1099-MISC for rent payments ($600+), royalties ($10+), prizes and awards, and other miscellaneous income. The key distinction: if you paid someone to do work for you and they're not your W-2 employee, that's a 1099-NEC.Who Gets a 1099
Issue a 1099-NEC when ALL of these are true: you paid $600 or more during the year, the payment was for services (not goods), the recipient is not a corporation (C-corp or S-corp), and the payment wasn't made via credit card or third-party payment network. You need the recipient's name, address, and TIN (usually SSN or EIN). Collect this using Form W-9 before you make the first payment.
Filing Deadlines and Penalties
1099-NEC is due January 31 — both to the recipient and to the IRS. There is no automatic extension. Penalties for late filing: $60 per form if filed within 30 days, $130 if filed by August 1, $330 if filed after August 1 or not filed at all. If you intentionally disregard the filing requirement, the penalty is $660 per form with no maximum.
1099-NEC is due January 31 — both to the recipient and to the IRS. There is no automatic extension. Penalties for late filing: $60 per form if filed within 30 days, $130 if filed by August 1, $330 if filed after August 1 or not filed at all. If you intentionally disregard the filing requirement, the penalty is $660 per form with no maximum.
Example: Small Business with Contractors
You run a marketing agency and paid three contractors in 2025: Designer ($8,000 via bank transfer), Copywriter ($4,500 via Venmo business), Photographer ($500 via check). You must issue 1099-NECs to the Designer and Copywriter (both over $600). The Photographer is under $600, so no 1099 required. If you paid anyone via PayPal or credit card, those are reported by the payment processor on 1099-K instead.
Common 1099 Mistakes
Not collecting W-9s upfront (then scrambling in January). Forgetting that Venmo/Zelle business payments still require 1099-NEC (only credit cards and PayPal goods/services are exempt). Issuing 1099s to corporations (generally not required except for attorneys and medical/healthcare payments). Not filing because the contractor is overseas (you still need to file if they performed services in the U.S.).Track Contractor Payments
Hivebooks tracks payments to contractors throughout the year and flags when someone crosses the $600 threshold, so you never miss a 1099 filing deadline.
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