1099-NEC Filing for Employers: What You Need to Know Before January 31

What is a 1099-NEC and who has to file one?

A 1099-NEC (Nonemployee Compensation) is the IRS form you use to report payments made to a contractor, freelancer, or independent service provider who is not on your payroll. You are required to file one if you paid a qualifying individual or entity $600 or more during the calendar year.

"Qualifying" matters here. The rule applies to individuals, sole proprietors, single-member LLCs, and partnerships. It does not generally apply to C-corporations or S-corporations — but there are exceptions, including attorney fees and certain medical payments. When in doubt, collect a W-9 before the first payment. The W-9 tells you exactly how to classify the payee.

The $600 threshold: how it actually works

The threshold is cumulative across all payments to a single contractor within a single calendar year. One payment of $650 triggers it. Six payments of $110 also trigger it — the moment the running total crosses $600, you have a filing obligation.

The threshold resets on January 1 each year. Payments from 2024 do not carry into 2025. Each tax year is calculated independently.

• $599.99 paid in 2025 — no 1099 required for 2025
• $600.00 paid in 2025 — 1099-NEC required for 2025
• Same contractor paid $400 in Dec 2025 and $300 in Jan 2026 — each year calculated separately; no 1099 required for either year

The W-9: collect it before the first payment

The W-9 is how you collect the contractor's legal name, tax classification, address, and Taxpayer Identification Number (TIN) — either a Social Security Number (SSN) or an Employer Identification Number (EIN). You need this information to prepare the 1099.

The IRS requires W-9 collection before the first payment. Year-end chasing doesn't satisfy this requirement — it just means you're late. If a contractor refuses to provide a W-9, you are required to withhold 24% of each payment as backup withholding and remit it to the IRS.

January 31 deadline: what it covers

January 31 is a hard deadline that covers two obligations simultaneously:

• Furnish to the contractor: The contractor must receive their copy of the 1099-NEC by January 31 so they can file their own taxes.
• File with the IRS: The IRS copy is also due by January 31 for 1099-NEC (this is different from the old 1099-MISC deadline, which was later).

If January 31 falls on a weekend or holiday, the deadline shifts to the next business day. Filing late carries penalties ranging from $60 to $630 per form depending on how late the filing is and the size of your business.

The most common 1099 mistakes — and how to avoid them

1. Missing W-9 at payment time. The fix: enforce a "no W-9, no payment" AP rule. Every new contractor gets a W-9 request before the first payment clears.
2. Name/TIN mismatch. The contractor's legal name must match their TIN exactly as filed with the IRS. Using a nickname or DBA when the W-9 shows a legal name causes a B-Notice from the IRS.
3. Missing the $600 threshold entirely. If you're tracking payments in a spreadsheet or relying on memory, you will miss it. Build a running total that alerts when a contractor approaches $600.
4. Filing for corporations when it isn't required. Check box 3 on the W-9 before filing. If the contractor is a C-corp or S-corp (and doesn't fall under an exception), you don't need to file a 1099-NEC.
5. Forgetting state filing requirements. Some states have their own 1099 filing deadlines and thresholds that differ from federal rules. Confirm your state's requirements — do not assume federal rules apply at the state level.

What to have ready before you file

• W-9 on file for every contractor at or above $600
• Legal name exactly as listed on the W-9 (not nickname, not DBA)
• Accurate TIN (SSN or EIN) from the W-9
• Total payments for the tax year, verified against your payment records
• Contractor's current address for mailing the Copy B

The more of this you have organized before January, the less painful the filing process. Classifi tracks contractor payments throughout the year and alerts you the moment any contractor crosses the $600 threshold — so January is a confirmation, not a scramble.