The IRS is introducing a new Form 1099-NEC to report non-employee compensation, beginning with the tax year 2020. Indeed, form 1099-NEC isn't a completely new form, it's a revived old form which hasn’t been used in over 30 years. The new 1099 NEC form replaces Form 1099-MISC Box 7 for reporting nonemployee compensation.
With Form 1099-NEC, IRS accelerated the due date for filing Form 1099 that includes non-employee compensation (NEC) from February 28 to January 31 and eliminated the automatic 30-day extension for forms that include NEC.
Use Form 1099-NEC only when payments ($600 or more) are made to an individual who is not your employee in the course of your trade or business. Personal payments are not reportable.
If the following four conditions are met, you must generally report a payment as NEC.
Form 1099-NEC has Payers information, Receivers information and three boxes to report nonemployee compensation, Federal Tax withheld and State information to the IRS. Payer’s information: Name, Address, and TIN Receiver’s information: Name, Address, and TIN
Box 1 - Nonemployee Compensation
Use this box to enter nonemployee compensation (NEC) of $600 or more. For example, a fee paid to a nonemployee, including an independent contractor, or travel reimbursement for which the nonemployee did not account to the payer, if the fee and reimbursement total was at least $600.
Box 2 - Reserved.
Box 3 - Reserved.
Box 4 - Federal Income Tax Withheld
Use this box to enter backup withholding information. For example, persons (payees) who have not furnished their TINs to payers are subject to withholding on payments required to be reported in box 1. A payer must backup withhold on certain payments if the payee did not give their TIN to the payer.
Boxes 5 - 7 - State Information
File Form 1099-NEC, Non-employee Compensation (NEC), for each person in the course of your business to whom you have paid the following during the year:
You must also file Form 1099-NEC for each person from whom you have withheld any federal income tax (report in box 4) under the backup withholding rules regardless of the amount of the payment.
Be sure to report each payment in the proper box because the IRS uses this information to determine whether the recipient has properly reported the payment.
The deadline for reporting nonemployee compensation on Box 7 of Form 1099-MISC is January 31st, but to report other types of income, the due date would be February 28 or March 31. There is a lot of confusion around Form 1099-MISC Box 7 nonemployee compensation and other types of income.
To get rid of this confusion the IRS revived an old form 1099-NEC that hasn’t been in use since 1982. Form 1099-NEC is still in draft mode, the IRS needs to clarify on the filing requirements, due dates.
Redesigned Form 1099-MISC due to the creation of Form 1099-NEC, IRS revised Form 1099-MISC and rearranged box numbers for reporting certain income.
Changes in the reporting of income and the 1099-MISC form’s box numbers are listed below.