Many small businesses and self-employed individuals are familiar with Form 1099-MISC. Starting in 2020, the Internal Revenue Service has split the Form 1099. Non-employee compensation (NEC) will now be reported on a new form, separate from other miscellaneous income types.
While the general rules of reporting remain the same, the most significant change is the breakout of NEC, from Box 7 of Form 1099-MISC to its own Form 1099-NEC. NEC still includes payments of $600 or more for services of non-employees and attorneys, but payments must now be reported in Box 1 of the new 2020 Form 1099-NEC. Payments of $600 or more for rent, prizes and awards, gross proceeds to attorneys, certain medical and health care payments and royalties over $10 should still be reported on Form 1099-MISC.
In addition, these changes to the Forms 1099 have corresponding changes to their filing deadlines. The 2020 Form 1099-MISC is due to recipients by February 1, 2021; however, paper filing is due by March 1st, and electronic filing is due by March 31st. On the other side, the 2020 Form 1099-NEC is due to both recipients and the IRS by February 1, 2021, regardless of paper or electronic filing.
Looking ahead, the IRS has also modified the threshold for the required electronic filing of most information returns (Forms W-2 and 1099). The threshold remains at 250+ forms filed for the tax year 2020, but drops to 100 forms in 2021, and 10 forms in 2022.
Need some more guidance on working with these changes? Give us a call and we’ll be happy to help.