Form 1099-NEC

Form 1099-NEC is the IRS information return you file to report payments you made to an unincorporated contractor for services during the year, once those payments cross the reporting threshold. NEC stands for nonemployee compensation: it covers people you hired but did not put on payroll, like a handyman, a plumber, a leasing helper, or an accountant, when they are a sole proprietor or a single-member LLC rather than a corporation.

In practice

Say you self-manage a fourplex and over the year you pay one handyman a total of $3,200 across six separate repair visits. He runs his business as a sole proprietor, not an incorporated company, and you paid him by check, not by credit card. Because the payments are for services, he is unincorporated, and the total clears the threshold, you owe him a Form 1099-NEC. You report the full $3,200 in box 1, send him his copy by January 31, and file the same form with the IRS by that date.

Two details change the answer. If you had paid that same handyman through a card or a third-party app, the payment processor handles the reporting on a 1099-K, so you file nothing. And if his business were a corporation, you would generally not issue a 1099-NEC at all. The way to know which contractors are corporations is to collect a Form W-9 from each one before you cut the first check, so the box is settled while you still have the invoice in front of you.

Why it matters to a small landlord

The deduction and the form travel together. The same contractor payments you write off as repairs or management fees on your Schedule E are the payments the IRS expects to see reported, so the safest habit is to track every vendor payment by name through the year rather than reconstructing it in April. Missing a required 1099-NEC carries a per-form penalty that climbs the longer it goes unfiled, and the deadline is early: both the contractor copy and the IRS copy are due January 31, weeks before your own return. For the full mechanics of who counts and how to file, see the deeper guide on 1099-NEC for landlords.

A 1099-NEC sits next to a few other terms worth knowing. The contractor payments it reports are ordinary operating expenses that reduce your taxable rental income, those expenses feed the net rental profit your QBI deduction is figured on, and a single large repair invoice you might otherwise capitalize can sometimes be expensed in full under the de minimis safe harbor. Keep the W-9s and the running vendor totals, and January 31 becomes a filing chore instead of a scramble.