There are over 800 forms used to report income, calculate taxes to be paid, and disclose information to the IRS. Effective January 2021, there will be one more.
For decades, business owners used Form 1099-MISC to report non-employee compensation and other miscellaneous income items. That form was due February 28th. But in 2015, in conjunction with the Protecting Americans from Tax Hikes Act, the date for reporting the non-employee compensation portion of Form 1099-MISC changed to January 31st. The multiple due dates for the singular form caused a lot of confusion for employers and mistakes within the IRS. So, the IRS separated non-employee compensation from the rest of Form 1099-MISC.
The new Form 1099-NEC—which is actually an old form that hasn’t been used since 1982—is not a replacement for Form 1099-MISC. It will be strictly used to report compensation given to nonemployees by a company. According to the IRS, businesses must file Form 1099-NEC for each person to whom the business has paid at least $600 in:
- Services performed by someone who is not an employee (including parts and materials).
- Cash payments for fish (or other aquatic life) that the company purchases from anyone engaged in the trade or business of catching fish.
- Payments to an attorney, law firm or other provider of legal services.
Similar to Form 1099-MISC, Form 1099-NEC will have multiple copies.
Here’s how to distribute them:
- Copy A: The IRS
- Copy 1: State tax department, if applicable
- Copy B: Independent contractor
- Copy 2: Independent contractor
- Copy C: Keep for business records
The new Form 1099-NEC must be filed by January 31st.
If you have questions about filing Form 1099-NEC or any tax forms, contact the knowledgeable accounting team of Boris Benic and Associates. We can help you navigate any uncertainty you have about this new form.