What You Need to Know about the New Form 1099-NECJanuary 14, 2021
More than 70% of filers who reported information in Box 7 of Form 1099-MISC in 2019 will want to be aware of the new form 1099-NEC. You’ll need to file by February 1, 2021.
Attention businesses…do you pay at least $600 for services performed in the course of your trade or business by a person who is not your employee? Starting in 2020, any business that this applies to (regardless of size) must file Form 1099-NEC. Let’s dive into the new form.
What is form 1099?
Many companies hire independent contractors and various service providers for a variety of business tasks like freelance writing and graphic designing.
Form 1099 is a type of information return that the IRS requires for reporting income from:
- Self-employment earnings
- Interest and dividends
- Government payments, and more
Before tax year 2020, nonemployee compensation was reported on Form 1099-MISC (box 7). The due date for reporting this compensation was accelerated to January 31st with the passing of the PATH Act in 2015. The deadline for reporting other information on Form 1099-MISC remained February 28 (paper filing) and March 31 (e-filing).
This led to some issues. For example, if a filer submitted 1099-MISC forms after January 31 and the forms listed an amount in box 7, the filer would receive a late notice from the IRS for the entire batch of forms. The filer would then have to indicate which forms in the batch were actually filed post January 31st, to rectify the situation with the IRS.
What is the new form 1099-NEC?
In efforts to alleviate this burdensome process, the IRS reinstated Form 1099-NEC to report nonemployee compensation. This means that nonemployee compensation is reported separately from other types of income reported on Form 1099-MISC.
Who has to file?
Businesses ranging from small to Fortune 500s will be impacted by the new form. Specifically, businesses will have to file the 1099-NEC for each person who they paid at least $600 for:
- Services completed by someone who is not their employee
- Cash payments for fish or aquatic life purchased from anyone in the trade of catching fish
- Payments to an attorney
Form 1099-NEC also must be filed for each person from whom a business has withheld any federal income tax.
When is the form due?
Normally, January 31st. Since January 31, 2021 falls on a Sunday this year, Form 1099-NEC is due February 1st in 2021.
Questions on your filing requirements? Contact us.