There are many tax forms a company needs to fill, and 1099-NEC is one of them. But many don't know how to fill it out specifically. In this article, we will show you how to fill out a 1099-Nec step by step.
Businesses used to fill Form 1099-MISC to report nonemployee compensation and a number of miscellaneous payments to vendors. But if you need to fill out 1099-NEC, you may need this tutorial. If you have paid any non-employees, including independent contractors, freelancers, or others, you must report the total of these payments for the year on IRS Form 1099-NEC. And this article will show you how to do so step by step.
Form 1099-NEC is used solely to report nonemployee compensation payments of $600 or more you make in the course of your business to individuals who aren't employees; If you make oil and gas payments for a working interest of $10 or more, you need to report the payment on Form 1099-NEC.
There are 14 items you need to fill out. They are:
1. Basic information
All the information above should be filled in the first box.
2. Payer's TIN
Here you need to enter your taxpayer identification number (TIN). Social Security Numbers and Employer Identification Numbers (EIN) are both TINs. The formatting varies depending on whether you use an EIN or SSN:
3. Recipient's TIN
Next, you need to enter the contractor's TIN. When you hire contractors, they must fill out Form W-9. You can find their TIN there.
4. Recipient's name
The only thing you need to enter in this box is the contractor's name. You can also find it from the Form W-9 you collected.
5. Street address
Enter the contractor's street address. You should be able to pull this information from Form W-9.
6. City, state, country, and ZIP
Enter the following contractor information in this box:
Again, you should be able to find this information in Form W-9.
7. Account number
If you gave the contractor a unique number for your records, enter the account number in this box. Otherwise, leave the box blank.
8. Box 1: Nonemployee compensation
Box 1 is where you enter the total amount of payments you gave to a nonemployee during the year.
Report all the payments that you made, including:
Note: If any payment is not subject to self-employment tax and not reportable anywhere else on Form 1099-NEC, report the amount in Box 3 of Form 1099-MISC.
9. Box 2: Direct sales
If you made any direct sales of $5,000 or more of consumer products for resale, buy-sell, deposit-commission, or any other basis, enter an “X” in the checkbox.
10. Box 3: (Empty)
Currently, Box 3 is empty. You may need to use this box in future tax years, but not yet.
11. Box 4: Federal income tax withheld
If your contractors' wages are subject to backup withholding, you must withhold federal income tax. Just report the amount in Box 4.
12. Box 5: State tax withheld
If you withheld state income tax on contractor payments, report the withheld taxes on Box 5. You can report withheld payments for up to two states.
13. Box 6: State/Payer's state number
If you withheld state tax, enter the abbreviated name of the state, as well as your state identification number, in Box 6; If you are reporting for more than two states, correctly match up the state and amounts, so they are next to one another.
14. Box 7: State income
Last but not least, enter the amount of the state payment in Box 7.
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Form 1099-NEC is a new form issued by the IRS beginning with the tax year 2020. This article wasn't giving you tax or legal advice, but some clarifications to the Form content. By the way, if you need a PDF editor to edit the file, EaseUS PDF Editor may be your best choice. Just download it on your computer and edit the Form right now!
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