If you’re trying to report miscellaneous payments and payments to independent contractors for 2020, it’s important to know that the IRS has changed the requirements.
Welcome back Form 1099-NEC! After 38 years of retirement, the IRS is bringing back Form 1099-NEC for reporting nonemployee contributions. This change also includes updates to Form 1099-MISC. Here’s everything you need to know about when to use Form 1099-MISC, when to use the new Form 1099-NEC, and the differences between the two.
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If you’ve been running a business for a while, you are probably pretty familiar with Form 1099-MISC. This form allows payers to report miscellaneous payments. In the past, we also used Form 1099-MISC to report nonemployee compensation. Now, that option, previously Box 7, is being removed. Businesses complete this form, send it to the IRS, and mail copies to their recipients.
Who needs to file the updated Form 1099-MISC?
Even though you can no longer report nonemployee compensation with Form 1099-MISC, there are still plenty of reasons you will need to file 1099-MISC for 2020 tax year. Here is what you should still use Form 1099-MISC for:
- Royalties or broker payments in lieu of dividends exceeding $10.
- Awards or prizes
- Medical and healthcare payments
- Fishing boat proceeds
- Payments made to attorneys
- Crop insurance proceeds
IRS Form 1099-NEC is the new requirement for reporting nonemployee compensation for 2020. Businesses need to file this form and provide their recipient with a copy by the due date.
Who needs to file Form 1099-NEC?
If you paid a nonemployee or independent contractor more than $600, you will need to report it to the IRS by filing Form 1099-NEC. Any payments that would have previously been entered in box 7 of Form 1099-MISC are now reported using Form 1099-NEC.
Form 1099-MISC and 1099-NEC Deadlines
Once you’ve figured out whether you need to file Form 1099-MISC, Form 1099-NEC, or both, it’s important to know when your form is due to the IRS.
Here are the deadlines for filing Form 1099-MISC. Businesses need to send out recipient copies by February 01, 2021. The paper filing deadline is March 01, 2021. If you choose to e-file, the deadline is March 31, 2021.
Form 1099-NEC is due on January 31. Due to January 31, 2020 falling on a weekend, businesses need to file Form 1099-NEC and send out all their recipient copies by February 1, 2021.
E-filing Form 1099-MISC and 1099-NEC
The IRS recommends e-filing, and it’s the best way to meet your deadlines for Form 1099-MISC and 1099-NEC. It’s also the best way to send out recipient copies. If you file with ExpressEfile, you can select the postal mailing option and let our team send out all your copies on your behalf.
Fill out your forms easily, transmit them directly to the IRS, and get access to error check, email support, and instant notifications on your return’s status when you file your taxes for 2020. Whenever you’re ready to get started, we’re here to help.