New Form 1099-NEC Draft is Released by IRS
Editor’s Note: Under the heading of “It’s About Time” the IRS has issued a new form to report the payments to independent contractors. The current Form 1099-MISC has two due dates: January 31st for payments reported in Box 7 and February 28th (or March 31st if electronically filed) for all other payments reported. The new form will not be available until 2021 for payments made in 2020.
IRS has released a draft of a new form, Form 1099-NEC, Nonemployee Compensation, to report nonemployee compensation paid in 2020. Previously, nonemployee compensation was reported on Form 1099-MISC, Miscellaneous Income.
Background. If the following four conditions are met, a payor must generally report a payment to the IRS as nonemployee compensation (NEC):
- The payor made the payment to someone who is not the payor's employee.
- The payor made the payment for services in the course of the payor's trade or business (including government agencies and nonprofit organizations).
- The payor made the payment to an individual, partnership, estate, or, in some cases, a corporation.
- The payor made payments to the payee of at least $600 during the year. (2019 Instructions to Form 1099-MISC)
For NEC payments made prior to 2020, NEC is reported on line 7 of Form 1099-MISC. (2019 Instructions to Form 1099-MISC)
The Protecting Americans from Tax Hikes Act (PATH Act) requires that, starting with payments made in 2017, a payor has to report nonemployee compensation payments on or before January 31 of the year following the year of payment.