Your Annual Reminder to File Worker 1099-NEC

This is your annual reminder to file worker 1099-NEC. If you paid any non-employees $600 or more in 2025 for services, you must issue each worker a Form 1099-NEC after year-end to avoid penalties.

Due Date to File Worker 1099-NEC

The 1099s for 2025 must be provided to workers and filed with the IRS no later than February 2, 2026. Normally the due date is January 31. As that date falls on the weekend, the due date is extended to February 2, 2026.

Landlords

The requirement to file Form 1099-NEC may also apply to landlords considering the 20% pass-through deduction (Sec. 199A deduction) for business income. The IRS, in regulations for this tax code section, cautions landlords that to be treated as a trade or business. Landlords should consider reporting payments to independent contractor service providers on IRS Form 1099-NEC. Please note, this wasn’t required for rental activities in the past. Nor is it required when a rental is classified as an investment rather than as a trade or business.

Additional Filing Requirements for 1099s

Although not commonplace, Form 1099-NEC filing is also required in the following situations:

• File Form 1099-NEC or Form 1099-MISC to report sales totaling $5,000 or more of consumer products to a person on a buy-sell, a deposit-commission, or other commission basis for resale.
• Also file Form 1099-NEC for each person from whom federal income tax has been withheld under the backup withholding rules regardless of the amount of the payment (report in box 4).

Form W-9

Have unincorporated workers complete and sign Form W-9 the first time you use their services, even if the initial payment is below the 1099 threshold. Having properly completed and signed Form W-9s for all independent contractors and service providers eliminates oversights. In addition, it protects you against IRS penalties, potential loss of the business deduction and conflicts.

IRS Form W-9 helps you collect the information needed to file 1099s for vendors, contractors, and service providers. This data includes the individual’s name, address, type of business entity, TIN, certifications of the ID number and citizenship status. It also provides verification that you complied with the law should the individual provide you with incorrect information. We highly recommend that you have potential vendors, contractors, etc., complete Form W-9 prior to engaging in business with them. The form can either be printed to fill out or completed onscreen and then printed. A Spanish-language version is also available. The W-9 is for your use only and is not submitted to the IRS. The W-9 was last revised by the IRS in March 2024. So be sure to use the latest version (including the instructions) and discard the older unused forms.

Household Workers

1099-NEC worker reporting does not apply to household workers, as they are considered employees. Call for additional information.

Penalties If You Do Not File File 1099-NECs

If a business doesn’t file a Form 1099-NEC or 1099-MISC on time, it can be fined between $60 and $340 for each form. The later the form is filed, the higher the penalty.

If a business chooses to ignore the filing rules on purpose, the penalty is much worse. They can be fined at least $680 per form, or 10% of the income listed on the form, with no maximum limit.

Endeavors to Mitigate Penalties

Have the contractor complete a Form W-9, Request for Taxpayer Identification Number and Certification, when they are initially hired. If that was not done, the following actions may help to mitigate penalties:

• Conduct Multiple Solicitations
  Make up to three efforts to obtain the TIN from the payee, proving reasonable attempts were made. Document all attempts through email, certified mail, or text messages.
• Initiate Backup Withholding
  If the contractor fails to provide their TIN, start backup withholding at a 24% rate on any subsequent reportable payments and send this to the IRS.
• Submit the 1099-NEC by Paper:
  If the TIN is still not received by the filing deadline, submit a paper Form 1099-NEC and write “Refused” in the section designated for the TIN.
• Reply to IRS notices
  The IRS may inquire about the missing TIN. You should respond promptly with proof of your attempts to obtain the TIN.

Consequences of non-compliance

If filing requirements are intentionally ignored, such as not collecting a TIN, substantial penalties could be imposed ($660 per form for the 2025 tax year), without a maximum cap. Following these procedures is essential in reducing penalties.

State Filings

State filing deadlines may vary. Some states participate in the Combined Federal/State Filing program, while others require direct filing.

E-File Mandate

Businesses must e-file if they submit 10 or more returns in a year.
This number is reached by adding all types of returns together, not by counting each type separately like before.

Paper Filed 1099-NECs

If a business is not subject to the e-file mandate, 1099-NECs can be paper filed, but on special scannable forms.

Preparing To File Worker 1099-NEC Next Year

The reporting threshold for independent contractors paid during the 2026 tax year has been increased to $2,000. Make sure W-9s are collected from all independent contractors regardless of the threshold amount to cover contingencies.

Need assistance with filing worker 1099-NEC or have questions, please give this office a call. You can complete the 1099-NEC worksheet and forward it to this firm to prepare 1099s.