Reporting NEC With New 1099 Form 2020: This tax session, millions of independent workers will receive 1099 NEC Form in the mail for the first time. Form 1099 NEC report non-employee compensation. Previously, businesses reported this income information on 1099 MISC box 7.
If you’re an independent contractor who has to receive that form in the past, you’ll now receive Form 1099 NEC instead. Other than the name of the Form, not much else has changed for form recipients. We are here to provide you information about the new Form reporting NEC in 2020 tax year.
What is the new 1099 Form to report NEC?
IRS introduced new Form to report non-employee compensations through 1099 NEC Tax Form. The taxpayers use the new Form to report the payments made in the 2020 tax year. Report the prior year payments made to non-employees in the current 2021 tax year using 1099 NEC Form. Following are the conditions required to file 1099 NEC Form:
- Compensation paid to non-employees must exceed $600.
- The non-employee compensations paid to an individual, estate or sole proprietors etc., but not for C or S corporations.
- Payments made are on purpose of carrying out business activities, not for personal use.
When to use a 1099 NEC Form?
The new 1099 NEC Forms performs the exact same functions as 1099 MISC box 7. The Form records payments of $600 or more to service providers during the calendar year. The service providers are either sole proprietors, or members of a partnership, or an entity. Depending on your needs of your business, you may utilize numerous independent contractors, such as:
- Graphic designers.
- Web developers.
- Cleaning professionals.
- Freelance writers.
- And other self-employed individuals.
For the above mention individuals and others, you must distribute Form 1099 NEC to recipients by February 1st, 2021. The Form is due to the IRS by February 1st, 2021. This due date is same, whether you are filing via paper or electronically.
What about 1099 MISC box 7?
You may wonder if the Form 1099 MISC serves any purpose, as you’ll no longer use the Form to report non-employee compensation. 1099 MISC Form remains the same, but in a different capacity. Generally, you should file 1099 MISC Form for anyone you paid at least $600 in rent, prizes and awards etc., in the previous year.
Due to reinstating Form 1099 NEC, the IRS redesigned 1099 MISC Form reporting boxes. Beginning with the 2020 tax year, the payors report the direct sales of $5,000 or more of consumer products using 1099 MISC box 7. The resale of consumer products is on a deposit-commission or buy-sell basis.
IRS 1099 NEC Form features
Following are the features of Form 1099 NEC online:
- The main characteristic of 1099 NEC is to clear the confusion created by dual filing deadlines of a single Form.
- 1099 NEC Tax Form is used only to report non-employee compensation paid to a non-employee during the tax year.
- Form 1099 NEC is issued only to non-employees who may be an individual, estate, or partnerships.
1099 NEC Form filing tips
To help you with upcoming filing of non-employee compensations, consider these do’s and don’ts:
- Do make sure you have a Form W-9 on file for each contractor before completing Form 1099 NEC.
- Make sure whether the person whom you’re paying is an employee or individual person.
- Verify whether the taxpayer identification number is correct.
- Use Form 1099 NEC to report independent contractor income exceeding $600 during a tax year.
- Don’t use Form 1099 NEC to report personal payments.
- Employee wages are not reportable on Form 1099 NEC.
- Don’t include Form to report gross proceeds paid to attorney.
Federal 1099 NEC Form revived back history
The Internal Revenue Service released its final version of Form 1099 NEC on December 6th, 2019 for reporting compensation paid to non-employees for the 2020 tax year. IRS 1099 NEC was previously retired in 1982 replaces box 7 of 1099 MISC Form in 2020. IRS revived back Form for reporting non-employee compensation and accelerates the due date for reporting to the IRS to February 1st, 2021.
The Protecting Americans from Tax Hikes Act of 2015 accelerated the deadline for filing with the IRS for non-employee compensation by the end of January every tax year. Prior to the change, payors were generally required to file 1099 MISC reporting non-employee compensation with the IRS by the end of February. The due date to furnish payee statements to the workers has always been January 31st every year. With this change, payees, and the IRS all receive the compensations information statements on January 31st every year. One complication of this accelerated deadline, was the filing deadline for other information reportable on Form 1099 MISC will not change. In some cases, these different deadlines required the clients to issue multiple 1099 MISC Forms and resulted in confusing process. To eliminate this confusion about different filing deadlines, IRS resurrected Form 1099 NEC. By this separate Form, there are two different filing deadlines for the two different Forms.
Have you got clear information about the new 1099 Form reporting NEC? Then you can file your information returns online. We provide you service to file 1099 NEC Form online. You can file your 1099 Forms electronically with 1099 NEC online. We provide you guidance to file your Forms in an easy and convenient way.