1099-NEC Forms: What You Should Know (& How to File Them Successfully)

Every online business owner who plans to work with independent contractors or freelancers needs to know about the 1099-NEC tax form! I know, I know—handling taxes can be a little intimidating, especially when you’re outsourcing work to others. But trust me: with just a little background knowledge and the right software programs, filing a 1099-NEC is going to be quick, easy, and stress-free. 

If you aren’t at all familiar with it, a 1099 form is where you report the amount of “non-employment income” that someone has earned. When you work with contractors or freelancers who aren’t your employees, a 1099-NEC is how you make sure they (and the IRS) know what they earned from you over the last year. 

Although there are various types of 1099 forms, we’re going to be focusing on the 1099-NEC form—this is the one that’s relevant to those of us small business owners working with independent contractors and freelancers! 

1099-NEC Forms: What You Should Know (& How to File Them Successfully) | Emily Volz Bookkeeper & CFO

What Is A 1099-NEC Form?

To get started, let’s go back to the basics and talk about what a 1099-NEC form is (and when it should be used). In general, 1099s are used for reporting non-employment income to the IRS. That can mean anything from earning money on stock investments to freelancing. 

As a business owner, you’re responsible for issuing 1099s to any freelancer or independent contractor who you’ve paid at least $600 over the course of the year. Usually, you’ll need to file and mail your team members their 1099-NEC forms by January 31st so that they have time to file their taxes. 

Yup, even if someone isn’t an official, full-time employee with your business, you’re still responsible for reporting their earnings to the IRS. So whenever you pay a non-employee (someone like a freelance writer, website designer, virtual assistant, accountant, or branding consultant) more than $600 during that tax year, you should collect their W9 form so you can file form 1099-NEC. 

Who Needs To Receive A 1099-NEC Form?

As of 2020, the 1099-NEC is specifically for Nonemployee Compensation (NEC), for each person in your business to whom you have paid at least $600 in any of the following during the year: 

  • Services performed by someone who is not your employee (including commissions, prizes, parts, and materials) (box 1);
  • Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish (box 1); or
  • Payments to an attorney (box 1). 

You must also file Form 1099-NEC for each person from whom you have withheld any federal income tax (report in box 4) under the backup withholding rules regardless of the amount of the payment.

Translation? Any contractors you paid more than $600 to throughout the year should receive a 1099-NEC from you UNLESS you paid them via credit card or PayPal business payment (see the 1099-K section below) or if they file as an S-Corp or C-Corp (this will show on their W9). 

How To File Your 1099-NEC Successfully

Although handling taxes for your online business isn’t necessarily fun, it’s made SO much easier with the right tools. Let’s go over three user-friendly platforms you can use to file 1099-NEC forms successfully. All of your ducks will be in a row, and you’ll feel much more prepared for tax season. 

Related: How To Handle Basic Bookkeeping For Your Business On Your Own Like A Pro

Track1099

The first tool you can use for your 1099-NEC form is Track1099. If you do your bookkeeping outside of Quickbooks Online, this is a great option for you. Or, if you used Track1099 last year, I recommend using it again—it keeps your information on file! 

Your first 10 forms are $2.99 each with Track1099. This tool can e-file with some states, but not all of them. Depending on the state, you might have to download and file them yourself, which takes a bit more manual entry! 

Make sure you fill out the 1099-NEC template accurately according to the platform’s instructions. Then, double-check the state requirements on the Track1099 website. 

Here’s what you need to in order to prepare your 1099-NEC forms with Track1099:

  • Create an account
  • Select the 1099 service
  • Add your payer (your business)
  • Either manually enter your recipients (based on their W9 forms) or download the 1099-NEC template, fill it out with the recipient information, and upload it
  • Follow the prompts to complete the filing
  • Check your state requirements here!

Related: ​​Money Saving Trick: The Best Time of Year to Save Money

Quickbooks Online

Next, let’s talk about Quickbooks Online. If you already keep your books up-to-date and reconciled in Quickbooks Online, this is the right tool for you to use for 1099-NEC forms. Quickbooks Online starts at $14.99, and additional forms are $3.99 each. 

Now, Quickbooks Online doesn’t file with your state, but you can download copies to file with your state on your own. And remember—if your books aren’t accurate, there’s a chance that your 1099-NEC forms won’t be accurate either. 

Make sure you: 

  • Enter the vendor as a contractor so all of their payments are recorded in the QBO 1099 e-file system. To do this:
  • Go to Expenses and choose Vendors
  • Select the vendor by clicking the name
  • Click the Edit button at the top of the screen
  • On the Vendor Information screen, place a checkmark on the box next to Track payments for 1099
  • Hit Save
  • Only have one vendor for this person – sometimes people accidentally add multiple vendors for the same person and assign transactions to both vendors, which will throw off the 1099 amount.
  • Check the state requirements on the QBO website

To prepare your 1099s in Quickbooks Online, you’ll need to: 

  • Go to Expenses and choose Vendors
  • Select Prepare 1099s
  • Follow the prompts to select the contractors you want to issue 1099-NECs to
  • Review the amounts QBO pulls up and make sure they match your records
  • Follow the prompts to complete the filing
  • Check your state requirements here

Gusto

If you’re using Gusto to pay your employees and contractors, you can fill out your 1099-NEC forms for free! 

Just be careful to manually enter any payments made outside of Gusto before December 31st. Review your contractor list and see if there’s anyone you paid outside of Gusto AND meets the requirements for a 1099-NEC form. 

If there is, make a list of their payments from the year and add the contractor to your account—here’s how:

  • Go to the People section and select Hire & onboard
  • ​Click Hire a new person
  • Click the Contractor tile 
  • Follow the prompts to enter in their info (if you don’t have a W9 on file for them, invite them to enter their own info)

Now, you’ll need to enter the historical payments for this contractor. 

To do this, click the Payroll section and select Pay contractors. Click the pay date and select the actual date you paid your contractor. A message prompting you to further indicate this is a “historical payment” will appear. 

Next to the contractor’s name, under the “Total amount” column, click Enter Payment. Under the “Payment method” column, click the contractor’s payment method (typically Check or Direct Deposit) until it updates to Historical Payment. Then, enter the number of worked hours, wages, or other additional earnings that were paid, and click continue. 

Review the summary and click Submit payments if everything looks right! Do this for all of the payments for the year. See—it’s pretty straightforward! You’ve got this. 

Gusto sends all of the required federal, state, and local filings of Forms 1099 directly to tax agencies on your behalf, so as long as all of your contractor information and payments are accurate – you don’t need to do a thing!


Preparing 1099-NEC forms isn’t too overwhelming, especially when you choose the right tool. Get ahead of the game and start thinking about preparing these forms now so that tax season is a breeze! 

1099-NEC Forms: What You Should Know (& How to File Them Successfully) | Emily Volz Bookkeeper & CFO

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My name is Emily Volz and I'm all about bringing more ease into finances. I merge data, strategy, and values together so we can make informed financial decisions that we feel good about!

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