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2 min read

1099-NEC Form: The New Way to Report Contractor Income

1099 NEC Form

Key Takeaways

  • The 1099-NEC is used to report non-employee compensation paid to independent contractors.
  • Employers in the United States are required to issue a 1099-NEC to any independent contractor who was paid $600 or more during the year.
  • If you’re hiring contractors outside of the United States, you don’t need to issue them a 1099-NEC. But there are other relevant documents you’ll need.

As an employer, you may be faced with the decision of whether to hire a full-time employee or an independent contractor. Understanding the requirements for issuing the 1099-NEC, also known as the “1099-Miscellaneous Income” form, is an important part of this decision-making process. In this blog post, we’ll explore when to issue the 1099-NEC to independent contractors abroad and when it may not be necessary.

What is a 1099 NEC form, and do I need to issue one to my contractors?

The 1099-NEC is used to report non-employee compensation paid to independent contractors.

In the United States, employers are required to issue a 1099-NEC to any independent contractor who was paid $600 or more during the year. However, there are exceptions to this rule.

For example, if an independent contractor is incorporated as a corporation or limited liability company (LLC), they may not need to receive a 1099-NEC. Additionally, if an independent contractor is paid for services that are not subject to federal income tax, such as personal or household services, a 1099-NEC may not be necessary.

When hiring independent contractors abroad, it’s important to research the requirements for issuing 1099-NEC forms in the country in which the independent contractor is based. These requirements may vary, and in some cases, a 1099-NEC may not be necessary.

In conclusion, the 1099-NEC is an important tax form for employers hiring independent contractors abroad. However, it’s important to understand when a 1099-NEC is required and when it may not be necessary. By researching the requirements of the country in which the independent contractor is based, and consulting with a legal or tax professional if necessary, you can ensure that you’re in compliance with local tax laws and regulations.

When should I use a 1099-MISC instead?

Typically, the 1099-MISC form is used to report miscellaneous income, like rent payments, prize winnings, and other types of payments outlined in this IRS article. But it’s no longer used to report standard non-employee compensation. That’s what the 1099-NEC is for.

What if I’m hiring contractors abroad?

If you’re hiring contractors outside of the United States, the rules are a bit different: Your contractors don’t need a 1099-MISC, because they’re not paying taxes within the United States. However, you’ll have to ask your contractor to fill out a Form W-8 BEN instead. By filling out this form, your contractor is letting the United States know that they’re not a U.S. taxpayer, and thus don’t require a 1099.

At RemotePad, Lech draws on his professional experience to write about employment taxes and payroll (both remote, and in-office). Lech holds a Bachelors’ degree from the University of Kent, a Master of Arts (MA) from Kings College London, and professional payroll and tax qualifications. He has 20 years experience advising on all manner of tax and business planning matters.

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