IRS Introduces New 1099 Form for Nonemployee Compensation

For the past 38 years, nonemployee compensation has been reported on Form 1099-MISC, but relatively recent tax law changes led the IRS to issue a new 1099 form beginning with the 2020 tax year. Beginning with the 2020 tax year, taxpayers reporting nonemployee compensation should use Form 1099-NEC (Nonemployee Compensation) not Form 1099-MISC (Miscellaneous Income).

The PATH Act of 2015 changed the annual due date for reporting nonemployee compensation from February 28 to January 31 and eliminated the automatic 30-day extension for forms that include nonemployee compensation. However, the due date was not changed for other types of payments reported on Form 1099-MISC, such as rents, royalties and other income. In an effort to avoid taxpayer confusion and alleviate processing challenges, the IRS deployed Form 1099-NEC for nonemployee compensation.

Form 1099-NEC should be filed for each person that is paid, in the course of a trade or business, at least $600 for services performed in a non-employee capacity. Only payments made in the course of a trade or business are reportable – personal payments are not reportable.

Form 1099-NEC is generally not required to be filed for payments made:

• To a corporation (including an S corporation and a limited liability company that is treated as a C corporation or an S corporation) (NOTE: This exception does not apply to payments for legal services. Payments of $600 or more paid in the course of a trade or business to an attorney must be reported on Form 1099-NEC even if the attorney’s firm is organized as a corporation.)
• For merchandise, telegrams, telephone, freight, and similar items
• For rent to real estate agents or property managers

For more information regarding Form 1099-NEC or any other questions, contact a Weaver professional today.

© 2020