1099-NEC Filing Explained: What Business Owners Need to Know for 2025 Contractor Payments
Every January, thousands of business owners face unexpected IRS penalties — not because they ignored the rules, but because the 1099 filing process is more confusing than it seems.
If you paid contractors or freelancers in 2025, understanding whether you need to file Form 1099-NEC is critical. Filing late, filing incorrectly, or failing to file altogether can quickly become costly.
Form 1099-NEC (Nonemployee Compensation) is used to report payments made to independent contractors, freelancers, and other non-employees for services performed. When required, the form must be filed with the IRS and a copy must be provided to each contractor.
In general, you will need to file a 1099-NEC if you paid $600 or more to a contractor during 2025, the payment was for services rather than products, the payment was made by check, ACH, wire transfer, or cash, and the contractor was an individual, sole proprietor, partnership, or certain LLCs depending on tax classification. When all of these conditions apply, a 1099-NEC filing is typically required.
On the other hand, many businesses file 1099s unnecessarily. You generally do not need to file a 1099-NEC if payments were made using credit cards, PayPal, Stripe, or other third-party processors, since those payments are reported separately on Form 1099-K by the payment processor. In addition, payments to corporations are usually exempt, with limited exceptions such as attorneys.
Deadlines for 1099-NEC filings are strict. For payments made in 2025, 1099-NECs must be sent to contractors by January 31, 2026. If January 31 falls on a weekend, the deadline moves to the next business day, which in this case would be February 2, 2026. Missing this deadline can trigger IRS penalties.
Penalties depend on how late the forms are filed. They can start at $50 per form for short delays, increase to $110 per form, and reach up to $580 per form for intentional disregard. For businesses with multiple contractors, penalties can add up quickly.
One of the most common issues we see is missing or outdated W-9 forms. Without accurate W-9 information, businesses often file incorrect 1099s, miss deadlines, or receive IRS notices. While W-9 forms do not need to be renewed every year, the information on file must always be accurate and up to date.
The good news is that 1099 compliance is completely manageable with the right process in place. At M7 Group, we help business owners determine which vendors actually require a 1099, organize and verify W-9 documentation, and prepare and file 1099-NECs accurately and on time.
If you paid contractors in 2025 and want to avoid penalties, confusion, and last-minute stress, we’re here to help. Reply to our email or book a call to review your 1099 requirements before the deadline. Being proactive now can save time, money, and unnecessary headaches later.
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