Form 1099-NEC – How Will it Impact Your Business?
When engaged in a trade or business, you are required by the Internal Revenue Service (IRS) to report certain payments you made to others throughout the year on a Form 1099. This coming January the Form 1099 filing season will look differently than it has in the past. Due to different filing deadlines for different boxes on the Form 1099-MISC, the IRS has created a new Form 1099-NEC (Non-Employee Compensation). In the past, non-employee compensation payments of at least $600 in the course of a year have been reported on the Form 1099-MISC in box 7. Non-employee compensation is considered payments made for services to a business or someone who is not an employee, cash payments for fish from someone engaged in catching fish as their trade or business, and payments for services made to attorneys.
Starting with the 2020 reporting period, these payments will now be reported on Form 1099-NEC. The Form 1099-NEC will be used to report only the non-employee compensation payments of $600 or more. The form will also include boxes to report applicable tax withholding and state information. You are still not required to issue the Form 1099-NEC to corporate taxpayers. The filing deadline for this form is February 1, 2021 by either paper or electronic filing.
The Form 1099-MISC form has been updated and has changed in appearance, but will continue to be used to report other payments to the IRS. These include royalty payments of at least $10 and other payments of at least $600 like rent, prizes and awards, other income, etc. The filing deadline for this form to the IRS is March 31, 2021.
Ketel Thorstenson, LLP is here to help you with the preparation and filing of both the new Form 1099-NEC and the Form 1099-MISC. Give us a call with any of your questions or concerns.