How to fill out a 1099 NEC form

If your US-based business works with independent contractors, you’re probably no stranger to IRS Form 1099-NEC (non-employee compensation). 

This form reports payments of $600 or more made to non-employees in a tax year, and staying compliant is critical.

In this guide on how to fill out a 1099-NEC form, we’ll walk you through each step of the process, point out common pitfalls to avoid, and explain how a global workforce platform like Payoneer Workforce Management can help you stay compliant when paying independent contractors.

How to fill out a 1099-NEC form

• Steps to Fill Out a 1099-NEC
• Who Needs to Fill Out a 1099-NEC
• Common Mistakes to Avoid

Knowing how to fill out a 1099-NEC Form is critical for US employers, especially when tapping into the remote labor. 

Below is a clear, step-by-step checklist to help ensure you complete the form accurately and stay compliant with IRS requirements.

Step	What to Do
Box 1: Non-Employee Compensation	Enter the total amount you paid the contractor during the year for services performed. Example: If you paid a freelancer $5,000 for design work, enter $5,000 in Box 1.
Payer’s Information (Top Left Section)	Fill in your business name, street address, city/state/ZIP, and Employer Identification Number (EIN) in the top left fields labeled “PAYER’S name, street address, city or town, state or province, country, ZIP or foreign postal code” and “PAYER’S TIN.” This identifies you as the party issuing the form.
Recipient’s Information (Top Left Section + Boxes 2 & 3)	Fill in the contractor’s: Full legal name (Recipient’s name)Address (street, city, state, ZIP)TIN (typically SSN or EIN, from their W-9) in “RECIPIENT’S TIN” boxAccount number in Box 2 (if applicable)Recipient’s phone number in Box 3 (optional but helpful)
Boxes 4-7: Additional Reporting (If Applicable)	Box 4: Backup withholding (only fill in if you withheld federal taxes)Box 5–7: State-related information:Box 5: State tax withheldBox 6: State/payer’s state numberBox 7: State income If none of these apply, leave them blank.
Filing Deadlines	Send Copy B to the contractor: No later than January 31. Submit Copy A to the IRS: By January 31 (paper or e-file).

What about foreign contractors?

If you’re working with contractors outside of the US, you typically won’t need to fill out a 1099 NEC form, although there are exceptions. Instead, you’ll likely need to file an IRS Form W-8BEN from the contractor. 

Payoneer WFM simplifies this task by collecting and storing tax forms, while our AOR service ensures compliance with local labor laws and tax obligations in over 160 countries.

Who needs to file a 1099-NEC?

If any of the following applies, you need to file a 1099-NEC:

#	Category
1	You are a business owner, sole proprietor, or organization operating in the United States
2	You paid $600 or more to a non-employee individual (such as an independent contractor, freelancer, or vendor) during the tax year
3	The payment was made for services performed (not goods or merchandise)
4	The worker is not your employee (i.e., they don’t receive a W-2)
5	The recipient is a U.S. citizen or resident (foreign contractors typically use a W-8BEN and aren’t issued a 1099-NEC)

Common mistakes to avoid

There are many potential pitfalls associated with incorrectly filing a 1099-NEC. Below are some of the most common ones to avoid.

Common Mistake	Why It Matters and How to Avoid It
Not collecting an IRS Form W9 before paying a contractor.	If you don’t have a contractor’s tax information upfront, you won’t be able to complete the 1099-NEC properly.  Always collect a signed W-9 before the first payment goes out.
Reporting incorrect payment totals.	This one is easy to miss, especially if you’re juggling multiple contractors or partial-year engagements. Keep clean records and verify totals before filing.
Filing late or omitting required forms.	You must send Copy A to the IRS and Copy B to the contractor on time. Late or incomplete submissions can lead to fines, even if the payment info is correct.
The big one: confusing W2 employees with 1099 contractors.	The biggest and most expensive mistake: misclassifying a W-2 employee as a 1099 contractor. If you control how and when someone works, odds are they should be on payroll, not a 1099.

From handling 1099s to global payments: How Payoneer WFM can help

Compliance can be tricky when filling out a 1099 NEC form, especially when managing a large, global contractor base. But with the right tools, it doesn’t have to be.

Payoneer WFM simplifies tax form collection, including W-9s and 1099-NECs, through guided automation that reduces errors and ensures timely filing. 

With EOR and AOR services, Payoneer WFM also enables you to classify and pay international contractors in over 160 countries, without setting up local entities. 

With Payoneer Workforce Management, you can transform complex processes into streamlined operations and have more time to focus on your business. 

FAQs

1. Can contractors fill out their own 1099-NEC?

No, contractors do not fill out their own 1099-NEC. The client or the business owner is responsible for preparing and issuing the 1099-NEC to the contractor and the IRS. Contractors provide their taxpayer information on a W-9, which the payer uses to complete the 1099-NEC.

2. What boxes do contractors fill out on 1099-NEC?

Contractors don’t fill out the 1099-NEC themselves. However, the key box that typically applies to them is Box 1 – Nonemployee Compensation, where the client reports the amount paid to the contractor during the year. The contractor’s name, address, and taxpayer identification number (TIN) are also included, but are provided by the contractor via Form W-9.

3. How much tax do contractors pay on a 1099-NEC?

Contractors pay self-employment tax (which covers Social Security and Medicare) and federal and possibly state income taxes on 1099-NEC income. Self-employment tax is 15.3% on net earnings (12.4% for Social Security, 2.9% for Medicare), and income tax rates vary based on income level and filing status. Contractors can deduct business expenses to reduce taxable income.