Difference Between IRS Form 1099-NEC And Form 1099-MISC: 1099-Misc and 1099-NEC forms are IRS Tax Forms. Both tax forms are used for reporting business-related payments not used for personally related payments. IRS newly joins the IRS 1099-NEC Form 2020 in 1099 series info.
1099-Misc Form is used in the past to report non-employee payments before introducing 1099-NEC. The 1099-Misc Information Return has been designed due to the creation of the 1099-NEC Tax Form beginning with the tax year 2020. Payers don’t report non-employee payments such as contractor payments on the 1099-NEC form for the 2020 tax year.
What Is Tax Form 1099-NEC?
Payers must use 1099-NEC 2020 to report non-employee compensation beginning with the tax year 2020. Generally, the payer must report a payment as a non-employee payment if the following four conditions are met.
- If the payer made the person who is not your employee, then the payment is considered as a non-employee payment. The person is doing services on a contract basis.
- Payer paid the payment for services rendered in the course of trade or business (includes non-profit organizations and government agencies).
- Payer made the payment to an individual, an estate, a partnership, or in some situations a corporation.
- If the payer paid payments at least $600 to the payee during the year, then the payer considers the payment as non-employee compensation.
Form 1099-NEC example
If the payer recruits a web designer for business development and paid more than $600, then he must issue a 1099-NEC form to the recipient by January 31st. Before providing 1099-NEC 2020, for reporting NEC payments payers use 1099-Misc Box 7. But presently, for the 2020 tax year, payers must issue a 1099-NEC Information Return to the IRS and send a printable 1099-NEC Form to the recipient before the 1099-NEC due date. The recipient uses the form for filing accurate federal income taxes with the IRS and no need to attach with the return.
What Is the 2020 Form 1099-MISC?
According to the IRS, the payer should file Form 1099 Online for each person to whom you have paid the following in the course of your business during the year beginning with the tax year 2020.
Payments Reported On 1099-Misc
- At least $10 in royalties or broker payments instead of dividends
- At least $600 in the following:
- Rents. ( Machine rents or rental payments)
- Prizes and awards. (getting prize money
- for winning competition)
- Other income payments.
- Generally, cash from a notional principal contract to a person, a partnership, or an estate.
- Any fishing boat profits.
- Medical and health care payments.
- Crop insurance proceeds.
- Payments to an attorney.
- Non-qualified deferred compensation.
When Payers file 1099- Misc Form to the IRS?
Payers must develop the Printable 1099-MISC Form to the recipient by January 31. Also, payers must file with the IRS by February 28 if filer uses paper form (March 31 if filing electronically). The due dates are February 1 to the recipient and March 1 to the IRS for 2021.
Difference Between IRS Form 1099-NEC And Form 1099-MISC: As a filer, you must know the differences between 1099-NEC and 1099-Misc. Based on the type of payment choose the 1099 Information Return and file with the Internal Revenue Service.