Filling out a 1099 starts with choosing the right form, collecting your payee’s tax information, and entering payment amounts in the correct boxes. Most businesses filing a 1099 are reporting payments to independent contractors, which means you’ll use Form 1099-NEC. The process is straightforward once you understand what goes where.
Pick the Right 1099 Form
The two most common versions are the 1099-NEC and the 1099-MISC, and they cover different types of payments.
Use Form 1099-NEC if you paid $600 or more to a non-employee for services. This covers freelancers, independent contractors, consultants, and anyone else who did work for your business but isn’t on your payroll. If you hired a graphic designer, an attorney (for legal services), or an IT consultant and paid them $600 or more during the tax year, they each get a 1099-NEC.
Use Form 1099-MISC if you paid $600 or more in rent, prizes and awards, medical or health care payments, attorney payments (for settlements, not services), crop insurance proceeds, or other miscellaneous income. There’s also a lower $10 threshold for royalty payments.
When in doubt, ask yourself: was this a payment for services someone performed for my business? If yes, 1099-NEC. If it was rent, royalties, or another non-service payment, 1099-MISC.
Collect Information Before You Start
You need each payee’s tax details before you can fill in a single box. The standard way to collect this is by having them complete a Form W-9, which gathers everything you’ll need:
- Legal name (and business name, if different)
- Federal tax classification: individual/sole proprietor, LLC, C corporation, S corporation, partnership, or trust/estate
- Mailing address
- Taxpayer Identification Number (TIN): a Social Security Number for individuals or an Employer Identification Number for businesses
Request a W-9 from every contractor before you make the first payment, not at tax time. If a contractor refuses to provide a TIN, you’re required to withhold 24% of their payments as backup withholding and report that amount when you file.
One important note on tax classification: you generally do not need to file a 1099 for payments made to C corporations or S corporations. The W-9 tells you what type of entity you’re dealing with, so collecting it early saves you from filing forms you don’t actually owe.
Fill Out the 1099-NEC Box by Box
The form has a payer section at the top left, a recipient section below it, and numbered boxes on the right side. Here’s what goes in each area.
Payer and Recipient Information
At the top, enter your business name, address, phone number, and TIN (your EIN, in most cases). Below that, enter the recipient’s name, address, and TIN exactly as it appears on their W-9. Format Social Security Numbers as XXX-XX-XXXX and EINs as XX-XXXXXXX. The TIN must match the name on line 1 of the W-9, or the IRS may flag a mismatch and assess a penalty.
Box 1: Nonemployee Compensation
This is the main box. Enter the total amount you paid this person or business during the tax year, as long as it’s $600 or more. This includes fees, commissions, prizes and awards for services, and any other compensation for work performed as a non-employee. If you reimbursed a contractor for expenses under a nonaccountable plan, include those reimbursements here too.
Box 2: Direct Sales
This box is only for payers who sold $5,000 or more in consumer products to a buyer for resale on a commission basis (outside of a permanent retail store). If that applies, check the box. Don’t enter a dollar amount. Most businesses leave this blank.
Box 3: Excess Golden Parachute Payments
This applies only to large severance-type payments that exceed a person’s average annual compensation over the prior five years. Unless you’re dealing with executive compensation arrangements, skip this box.
Box 4: Federal Income Tax Withheld
Enter any backup withholding you deducted from the recipient’s payments. This typically happens when a payee didn’t provide a valid TIN. If you didn’t withhold anything, leave it blank.
Boxes 5, 6, and 7
Box 5 and Box 6 relate to state tax information, including state income withheld and state identification numbers. Box 7 is for the state income amount. These boxes are used when your state participates in the Combined Federal/State Filing Program, which lets you file once and have the IRS forward the data to your state.
Filing With the IRS
You need to send copies to two places: the recipient and the IRS.
For the 1099-NEC, both the recipient copy and the IRS copy are due on January 31 of the year following the payments. There is no automatic extension for this form. If you paid a contractor in 2025, both copies must be postmarked or e-filed by January 31, 2026.
If you’re filing 10 or more information returns in total (across all types, not just 1099-NECs), you are required to file electronically. The IRS offers a free online portal called IRIS (Information Returns Intake System) at IRS.gov/IRIS for e-filing. You can also use payroll software or a tax preparation service that handles electronic submission. If you’re filing fewer than 10 returns, you can still submit paper forms, but you’ll need to include a Form 1096 as a transmittal summary when mailing paper copies to the IRS.
Penalties for Late or Incorrect Filing
The IRS charges per-form penalties that increase the longer you wait. For returns due in 2026, the penalty schedule is:
- Up to 30 days late: $60 per form
- 31 days late through August 1: $130 per form
- After August 1, or never filed: $340 per form
- Intentional disregard: $680 per form
These penalties apply separately for each information return you fail to file and for each payee statement you fail to deliver. So if you skip both the IRS filing and the recipient copy for one contractor, that’s two penalties. Filing with incorrect information (wrong TIN, wrong dollar amount) triggers the same penalty structure. The simplest way to avoid all of this is to collect W-9s early, double-check your numbers, and file before January 31.
Filling Out a 1099-MISC
The payer and recipient sections work the same way as the 1099-NEC. The difference is in the numbered boxes, which correspond to different payment types:
- Box 1: Rents ($600 or more)
- Box 2: Royalties ($10 or more)
- Box 3: Other income, such as prizes and awards not for services
- Box 6: Medical and health care payments ($600 or more)
- Box 10: Crop insurance proceeds ($600 or more)
- Box 14: Gross proceeds paid to an attorney ($600 or more), such as settlement payments
Enter the total calendar-year payment in the appropriate box. If you owe a payee a 1099-MISC for multiple categories (say, rent and royalties), you can report both on a single form using the corresponding boxes.
The 1099-MISC deadline for the IRS copy is February 28 for paper filers or March 31 for electronic filers. The recipient copy is still due January 31.
Keeping Your Records Organized
Retain copies of every 1099 you file, along with the W-9 forms you collected, for at least four years. If a contractor disputes the amount you reported, your payment records (bank statements, invoices, canceled checks) are your backup. Keeping W-9s on file also protects you if the IRS questions whether you collected proper identification before making payments.