Form 1099-NEC is a type of US tax form used to report compensation for non-employees, like contractors or freelancers. Unlike a W-2 form, which is used to report employee compensation, a Form 1099-NEC will only include the total amount paid to the freelancer/contractor during the tax year but will not include information on tax withholdings.
What’s included on a Form 1099-NEC?
Typically, a form 1099-NEC will include the following information:
- The total amount paid for services during the tax year
- Full name
- Taxpayer identification
Who’s required to submit a Form 1099-NEC?
Any business that pays out a minimum of $600 during the tax year to a freelancer or contractor who is a U.S citizen is required to submit a 1099-NEC.
What is the difference between 1099-NEC and 1099-MISC?
Non-employee compensation for a global workforce
Non-employee compensation processes differ around the world. For companies with global operations, this can make things difficult. The two main challenges include:
- Different tax forms: Managing different tax forms doesn’t just mean filling out more than one paper. It also means navigating different tax laws and regulations, ensuring compliance across the board, and tracking any changes that may occur in the reporting process.
- Multiple currencies and payment methods: Multiple currencies and payment methods also require navigating through a maze of exchange rates, bank accounts, and payment processing platforms to ensure freelancers and contractors are paid on time
One way to get past these obstacles is by partnering with a payment distribution platform. The right third-party platform can navigate the regulatory environment of multiple countries and offer SWIFT and cheaper solutions to making payments in different currencies.