If the payment meets the following conditions, it counts as non-employee compensation:
- The payments total $600 or more during the calendar year
- You made the payment to someone that is not your employee
- You made the payment to an individual, partnership, estate, or, in certain cases, a corporation
- You made the payment for services in the course of your trade or business. You are considered engaged in a trade or business if you operate for gain or profit
- Please note, non-profit organizations, including churches and 501(c) organizations, are subject to these reporting requirements
If you determine that the payment is considered non-employee compensation, have the recipient (the person you made the payment to) complete Form W9. Form W9 supplies you with the required information for each recipient to issue them Form 1099-NEC. It is best to have the recipient fill out Form W9 before they perform work for you.
A copy of Form 1099-NEC must be provided to the recipient by January 31st of the year following payment. You must also send a copy of Form 1099-NEC to the IRS (and some states) by January 31st.