{"id":578,"date":"2020-12-08T07:22:45","date_gmt":"2020-12-08T07:22:45","guid":{"rendered":"https:\/\/blog.tax1099.com\/?p=578"},"modified":"2025-10-14T11:47:52","modified_gmt":"2025-10-14T11:47:52","slug":"form-1099-nec-replaces-box-7-on-misc","status":"publish","type":"post","link":"https:\/\/www.tax1099.com\/blog\/form-1099-nec-replaces-box-7-on-misc\/","title":{"rendered":"How Form 1099-NEC Replaces Box 7 on Form 1099-MISC for Tax Year 2020-2021"},"content":{"rendered":"\r\n

With Box 7 eliminated from Form 1099-MISC, the new Form 1099-NEC is where businesses have to report nonemployee compensations<\/strong>.<\/p>\r\n\r\n\r\n\r\n

As the New Year is approaching faster than ever, businesses are preparing for a less-challenging 2021 by gathering all the information needed to e-file Form 1099-NEC for the tax year 2020-2021.<\/p>\r\n\r\n\r\n\r\n

Earlier this year, the IRS announced that there have been some changes made to Form 1099-MISC in light of protecting employed workers who are being misclassified as \u201cindependent contractors\u201d.<\/p>\r\n\r\n\r\n\r\n

That\u2019s right. There are some businesses, especially in the healthcare industry that have been misclassifying their employed workers as independent contractors.<\/p>\r\n\r\n\r\n\r\n

Now you may wonder how these businesses would benefit from misclassifying their employees.<\/p>\r\n\r\n\r\n\r\n

You see, by misclassifying employed workers as independent contractors, these companies are denying them employee benefits such as workers\u2019 compensation, health insurance, and more. This is a mean-spirited tactic used by businesses to cut down on taxes.<\/p>\r\n\r\n\r\n\r\n\r\n\r\n

So, to protect the interests of employed workers and to closely monitor the nonemployee compensation reports accurately, the IRS has eliminated Box 7 of Form 1099-MISC and replaced it by (re)-introducing a 40-year-old form<\/strong> called \u2018Form 1099-NEC\u2019. Of course, the form has been updated to add consensus to the current state of tax affairs.<\/p>\r\n\r\n\r\n\r\n

So, businesses have to use Form 1099-NEC to report all nonemployee compensations (NEC) to the IRS starting this tax year 2020-2021.<\/p>\r\n\r\n\r\n\r\n

Please note that the print version of this PDF will not be valid because it does not support scanning procedures specified by the IRS.\u00a0<\/p>\r\n\r\n\r\n\r\n

Box 7 of Form 1099-MISC<\/h2>\r\n\r\n\r\n\r\n

Previously, Box 7 of the 1099-MISC was used by businesses to report any compensations or payments made to independent contractors or vendors.<\/p>\r\n\r\n\r\n\r\n

Now, you have to note that these independent contractors or vendors are in no way the employees of the company. They are just being compensated for the services utilized.<\/p>\r\n\r\n\r\n\r\n

If a business made a payment or compensated a contractor or vendor for their services, and the amount is at least $600 in total, then such nonemployee compensations have to be reported in Box 7 of Form 1099-MISC<\/a>.<\/p>\r\n\r\n\r\n\r\n

But not anymore.<\/p>\r\n\r\n\r\n\r\n

Replacing Box 7 with Form 1099-NEC<\/h2>\r\n\r\n\r\n\r\n

Starting from the tax year 2020-2021, business taxpayers will have to report all their non-employee compensations on the new Form 1099-NEC.<\/p>\r\n\r\n\r\n\r\n

If you are a self-employed contractor or a freelancer, expect to receive a copy of the Form 1099-NEC from businesses that paid you for utilizing your services.<\/p>\r\n\r\n\r\n\r\n

If you are a business that paid a\u00a0 vendor or an independent contractor or a freelancer or any other individual who in no way constitutes as your employed worker, then you have to send a copy of the Form 1099-NEC to them.<\/p>\r\n\r\n\r\n\r\n

This way, the IRS gets to keep tabs on businesses that are misclassifying their employed workers as \u2018nonemployee workers\u2019 and evading taxes.<\/p>\r\n\r\n\r\n\r\n

Please note that if the independent contractor is a \u2018C\u2019 or \u2018S\u2019 corporation, the business that paid to such corporation need not file Form 1099-NEC.<\/p>\r\n\r\n\r\n\r\n

Bonus Note:<\/strong> The independent contractor or vendor or nonemployee worker in the subject is not responsible for filing the Form 1099-NEC (but the payer is).<\/p>\r\n\r\n

\r\n

Report all non-employee compensations on 1099-NEC<\/h3>\r\n
\r\n
E-File 1099-NEC <\/a><\/div>\r\n<\/div>\r\n<\/blockquote>\r\n\r\n

Due Date to File Form 1099-NEC in 2020-2021<\/h2>\r\n\r\n\r\n\r\n

All businesses are required to file Forms 1099-NEC<\/a> to the IRS on or by the 31st<\/sup> of January 2021. As the 30th<\/sup> and 31st<\/sup> of January 2021 fall on a weekend, the 1099-NEC due date<\/a> is postponed to the 1st<\/sup> of February 2021.<\/p>\r\n\r\n\r\n\r\n

Please note that the 30-day automatic extension for filing forms (including NEC) has been eliminated by the IRS according to the PATHS Act.\u00a0<\/p>\r\n\r\n\r\n\r\n

Important Boxes in Form 1099-NEC\u00a0<\/h2>\r\n\r\n\r\n\r\n

Form 1099-NEC is relatively small with just 7 boxes in total. SO, you (The filer) are required to enter your and your recipient\u2019s TIN, along with your address details, and other general information.<\/p>\r\n\r\n\r\n\r\n

The key boxes ask the filer to report information as follows:<\/p>\r\n\r\n\r\n\r\n

Box 1:<\/strong> Paying someone (who is not your employee) for utilizing their services (including parts and materials).<\/p>\r\n\r\n\r\n\r\n

Box 2:<\/strong> Payer made direct sales totaling $5,000 or more of consumer products to the recipient for resale.<\/p>\r\n\r\n\r\n\r\n

Box 3:<\/strong> Reserved.<\/p>\r\n\r\n\r\n\r\n

Box 4: <\/strong>Businesses have to report for each person from whom they have withheld federal income tax (regardless of the amount of payment).<\/p>\r\n\r\n\r\n\r\n

Combined Federal\/State Filing Program (CF\/SF) Not Applicable for Form 1099-NEC<\/h2>\r\n\r\n\r\n\r\n

Please note that e-filings will not be forwarded to the states as the deadlines may vary for certain states. Previously, the Combined Federal\/State Filing Program (CF\/SF) allowed businesses to forward the e-files to the states for compliance. But with the introduction of Form 1099-NEC, this may not be possible.<\/p>\r\n\r\n\r\n\r\n

However, you can always rely on Tax1099\u2019s all state-compliant e-filing platform, which allows you to e-file all your 1099-NEC and other forms effortlessly in just 3 easy steps.<\/p>\r\n\r\n\r\n\r\n

Tax1099<\/a> is an IRS-authorized e-filing platform trusted by 150,000+ businesses globally. A two-time \u2018Accountex User Favorite\u2019 award winner, Tax1099 provides state and federal compliant forms to businesses of all sizes and types.<\/p>\r\n\r\n\r\n\r\n

You can start by creating your free account and e-file your forms. What\u2019s more? Tax1099 is integrated with accounting and data management tools, such as Quick Books, Zoho Books, Bill.com, and many more dynamic integrations to make your bulk e-filings a breeze.<\/p>\r\n\r\n\r\n\r\n

Tax1099 does not charge you anything until you choose to file to the IRS. And even when you do file, Tax1099 only charges you as less as $0.55 for each form.<\/p>\r\n\r\n\r\n\r\n

\r\n

Paid an independent contractors or vendors for their services?<\/h3>\r\n
\r\n
E-File 1099-NEC <\/a><\/div>\r\n<\/div>\r\n<\/blockquote>","protected":false},"excerpt":{"rendered":"

With Box 7 eliminated from Form 1099-MISC, the new Form 1099-NEC is where businesses have to report nonemployee compensations. As the New Year is approaching faster than ever, businesses are preparing for a less-challenging 2021 by gathering all the information needed to e-file Form 1099-NEC for the tax year 2020-2021. Earlier this year, the IRS […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[10,23],"tags":[21,22,204],"class_list":["post-578","post","type-post","status-publish","format-standard","hentry","category-1099-forms","category-form-1099-nec","tag-form-1099","tag-form-1099-nec","tag-form-1099-nec-replaces-box-7"],"acf":[],"yoast_head":"\nHow Form 1099-NEC Replaces Box 7 On Form 1099-MISC?<\/title>\n<meta name=\"description\" content=\"With Box 7 eliminated from Form 1099-MISC, the new Form 1099-NEC is where businesses have to report nonemployee compensations. 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