Changes in 1099 Reporting for Tax Year 2020 – FORM 1099-NEC

By Dorothy P. Eyerly, LSWG Staff Accountant II

The IRS has issued a new form for reporting nonemployee compensation: Form 1099-NEC. Nonemployee compensation payments were previously reported in Box 7 of the Form 1099-MISC. The initial filing period using Form 1099-NEC will cover January 1, 2020 through December 31, 2020.

Nonemployee compensation payments are payments totaling $600* or more, made in the calendar year in connection with a trade or business for the following:

• Services performed by someone who is not your employee
• Payments to an attorney for attorneys’ fees

Form 1099-NEC is not issued to a corporation–except when payments are for attorney services and cash payments for fish for resale.

The deadline for issuing Form 1099-NEC to recipients and filing with the IRS is January 31 of the following tax year. For tax year 2020, the due date is February 1, 2021 (because January 31 falls on a weekend). There is no automatic 30-day extension for filing the Form 1099-NEC.

All other payments that were previously reported on Form 1099-MISC will continue to be reported on this form. Those payments include, but are not limited to: rents, royalties, prizes and awards, and other income. Some businesses or nonprofits will have to file both the 1099-NEC for nonemployee compensation and the 1099-MISC for other payments they made during the year.

The filing deadline for submitting Form 1099-MISC to the IRS is February 28 of the following tax year. For 2020 payments, the due date is March 1, 2021 (since February 28 falls on a weekend).

The deadline for delivering the recipient copy of both the 1099-NEC and the 1099-MISC forms remains January 31 of the following year. Since January 31, 2021 falls on a weekend, the deadline for issuing recipient copies for tax year 2020 is February 1, 2021.

Reminder: Form W-9 (Request for Taxpayer Identification Number and Certification) is your best tool to gather Form 1099 recipient information. Ideally, request a completed Form W-9 prior to any financial transactions with a vendor. Doing so will motivate the recipient to provide the requisite information in a timely manner.

LSWG’s Client Accounting Services Department is keeping up-to-date on these issues and more that may impact your payroll processing and reporting. If you have any questions, please give our office a call at 301.662.9200.

_________

*If you performed backup withholding, the $600 reporting minimum does not apply.