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The IRS says to file form 1099-NEC for each person in the course of your business to whom you have paid $600 for "services performed by someone who is not your employee (including parts and materials)

Forum|Forum|3 years ago
April 27, 2023
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Then down further the IRS states that you do not need to file form 1099-NEC for "payments for merchandise".

We are an LLC. We have a man come by our shop who will leave us tools and some parts to go through and then pay him for what we want. He is just an individual, not a "business". We do purchase more than $600 worth of goods from him in a year.

Do we need to file a 1099-NEC for this person? I feel a bit confused as to how to classify what we buy from him. Most of the time it is tools we are purchasing, but sometimes it might be more of a "part". Is there a simple answer? I just want to get it all straight now before years end so that my records are right.

Thank you.

Best answer by rjs

Tools and parts are not services. They are merchandise. The man is not performing any services for your business. He is just selling you things. You are paying him for the items that you buy, not for any services that he performs. You do not file a 1099-NEC for the purchases.

(By the way, the man who sells you the tools and parts most definitely is a business. He is in the business of selling tools and parts. It may be a one-person business, which is called a sole proprietorship, but it is certainly a business. But whether or not it's a business does not affect whether you have to file a 1099-NEC for the purchases.)

rjsAnswer

Employee

Tools and parts are not services. They are merchandise. The man is not performing any services for your business. He is just selling you things. You are paying him for the items that you buy, not for any services that he performs. You do not file a 1099-NEC for the purchases.

(By the way, the man who sells you the tools and parts most definitely is a business. He is in the business of selling tools and parts. It may be a one-person business, which is called a sole proprietorship, but it is certainly a business. But whether or not it's a business does not affect whether you have to file a 1099-NEC for the purchases.)