---
title: "What is 1099-nec?"
description: "1099-nec explained in plain English: definition, how it works, an example, and how it appears in QuickBooks and Xero."
url: https://ledgerbpo.com/glossary/1099-nec/
updated: 2026-09-11
publisher: LedgerBPO (SS Support Network LLC)
language: en-US
---

# What is 1099-nec?

Glossary

Form 1099-NEC is the IRS information return a US business files to report nonemployee compensation of $600 or more paid to a contractor, freelancer or other non-employee during the calendar year, kept separate from wages reported on an employee's W-2.

Updated September 2026

## How 1099-nec works

Before paying a new contractor, a business collects a completed Form W-9 to capture the contractor's legal name, tax classification and taxpayer identification number before the relationship even begins. Payments made during the year are tracked separately from employee wages, coded to a 1099 vendor account so the business knows exactly which vendors crossed the $600 threshold by year end rather than reconstructing totals from bank statements and old invoices in a rush every January.

In January, the business prepares a 1099-NEC for each qualifying contractor, showing total nonemployee compensation in box 1 for the year. Copies go to the contractor and to the IRS, generally by January 31, and accurate totals depend entirely on clean, up-to-date vendor records kept consistently throughout the year. A missing or incorrect taxpayer identification number at this stage often means correcting and refiling later, along with possible penalties for late or inaccurate filings.

## Example

A marketing agency pays a freelance designer $8,500 across the year for logo and web work, all through direct deposit tracked as a 1099 vendor in the accounting system from the first payment onward. Because the total exceeds $600 and the designer is not an employee, the agency issues a 1099-NEC showing $8,500 in box 1 and files it with the IRS by January 31, alongside a copy sent to the designer for her own personal tax return.

## 1099-NEC in QuickBooks Online vs Xero

QuickBooks Online tracks vendors marked as 1099 contractors year-round and offers an e-file service that prepares and submits 1099-NEC forms at year end based on those running totals, without a separate spreadsheet. Xero does not file US 1099s natively, so businesses on Xero typically pair it with a service such as Track1099 to collect W-9s, track thresholds and e-file the forms each January.

## Related terms

- [W-9](https://ledgerbpo.com/glossary/w-9/)
- [1099-MISC](https://ledgerbpo.com/glossary/1099-misc/)
- [W-2](https://ledgerbpo.com/glossary/w-2/)
- [All terms](https://ledgerbpo.com/glossary/)

## How LedgerBPO handles 1099-nec

We track contractor payments throughout the year, flag vendors approaching the $600 threshold and prepare 1099-NEC forms ready for your review and filing, using the W-9 details already on file. Your firm or accountant reviews and signs off before anything is actually submitted to the IRS.

[Contractor forms compiled and filing-ready](https://ledgerbpo.com/services/1099-preparation/)

Next step

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Source: https://ledgerbpo.com/glossary/1099-nec/ · Contact: https://ledgerbpo.com/contact/ · Full site map for agents: https://ledgerbpo.com/llms.txt