If you’re paying self-employed independent contractors, you need to report payments to the IRS with Form 1099-NEC (this switched from 1099-MISC in 2020). However you only need to do this if you paid them more than $600, their business entity isn’t a C corp or S corp, and you didn’t pay them with a credit card.
You’ll need to send a copy to the independent contract, the IRS and most likely your state. If you’re using a payroll platform, the 1099-NEC will probably be automatically generated by the system and may even be submitted to the IRS and state for you.
Also, for independent contractors who you need to file a 1099-NEC, you need to make sure you get them to fill out a Form W-9 when they start their work so you know how to fill out their 1099-NEC.
The 1099-NEC lets you tell the government how much you paid any non-employee contractors so that they can report the earnings in their taxes.
Disclaimer: Any articles written on this website, including this article, are not to be taken as legal or HR advice. Employment laws are constantly changing and vary by location and industry. You should consult a lawyer or HR expert for guidance. Need HR advice? We can help!