New Form 1099-NEC for Reporting Nonemployee Compensation

Beginning with tax year 2020, you must use Form 1099-NEC, Nonemployee Compensation, to report payments of nonemployee compensation (NEC) previously reported in box 7 on Form 1099-MISC.

The Protecting Americans from Tax Hikes (PATH) Act in 2015 accelerated the due date for filing Forms 1099 that include nonemployee compensation (NEC) from February 28 to January 31 and eliminated the automatic 30-day extension for forms that include NEC. However, the due date for reporting other information on Form 1099-MISC continued to be February 28 for paper filers, and March 31 for electronic filers. This created an administrative burden for payers and the IRS. Therefore, beginning with tax year 2020, the IRS has a new Form 1099-NEC to report nonemployee compensation.

Nonemployee Compensation

If the following four conditions are met, you must generally report a payment as nonemployee compensation.

1. You made the payment to someone who is not your employee;

2. You made the payment for services in the course of your trade or business (including government agencies and nonprofit organizations);

3. You made the payment to an individual, partnership, estate, or in some cases, a corporation; and

4. You made payments to the payee of at least $600 during the year.

Nonemployee compensation may be subject to backup withholding if a payee has not provided a taxpayer identification number (TIN) to the payer or the IRS notifies the payer that the TIN provided was incorrect.

Generally, payers must file Form 1099-NEC by January 31. For 2020 tax returns, the due date is February 1, 2021. There is no automatic 30-day extension to file Form 1099-NEC. However, an extension to file may be available under certain hardship conditions.

Due to the creation of Form 1099-NEC, the IRS has also revised Form 1099-MISC and rearranged box numbers for reporting certain income.

We are here to help you with these filing obligations and any questions you may have regarding them. Please feel free to call us to further discuss your needs or uncertainties with respect to these requirements.