2020 Form 1099 Filings Revisions with Form 1099-NEC Reporting
For the 2020 tax year, former IRS 1099-MISC filers will need to comply with new 1099 reporting rules. Form 1099-NEC, Non-Employee Compensation has been refurbished and brought back to the showroom floor and is intended to replace Form 1099-MISC for nonemployee compensation.
While Form 1099-MISC will still be part of the 1099 filing tradition for certain payments, for the 2020 tax year non-employee compensation payments for independent contractors and other business services from non-employees now 1099 reporting will be on the Form 1099-NEC.
The newly revised Form 1099-NEC payments include:
- services performed (including parts and materials), as well as certain payments to an attorney,
- cash payments for fish or other aquatic life or business of catching fish,
- reporting includes oil and gas payments for a working interest (whether or not services are performed), and
- include expenses incurred for the use of an entertainment facility that you treat as compensation to a nonemployee.
The IRS rules that trades or businesses need to issue a Form 1099-NEC if the following four conditions are met:
- You made the payment to someone who is not your employee;
- You made the payment for services in the course of your trade or business (including government agencies and nonprofit organizations);
- You made the payment to an individual, partnership, estate, or, in some cases, a corporation;
- You made qualifying payments to the payee of at least $600 during the year.
The Form-1099 NEC is being reintroduced to prevent room for tax fraud with EITC and ACTC refunds.
State 1099 Filings
In addition, the IRS has not coordinated the Form 1099-NEC with individual state revenue agencies. Hence for filing 1099s for recipients that reside in states that require submission of Form 1099 information, you should submit a separate state filing Form applicable as required.
The IRS also has made revisions to Form 1099-MISC and rearranged box numbers for certain payment reporting with the addition of Form 1099-NEC. Form 1099-MISC is required to be filed with the IRS by February 28 of the following calendar year, but it must be filed with the IRS by January 31 if nonemployee compensation is reported in box 7 for payments made before 2020.
The 2020 tax year changes to reporting on Form 1099-MISC include:
- Payments made for direct sales of $5,000 or more (checkbox) in box 7,
- Crop insurance proceeds are reported in box 9,
- Payments to an attorney are reported in box 10,
- Section 409A deferrals are reported in box 12,
- Nonqualified deferred compensation income is reported in box 14, and
- Boxes 15, 16, and 17 report state taxes withheld, state identification number, and amount of income earned in the state, respectively.
If you have any questions with regards to your 2020 1099 filings please contact us.