Lieberman & Brandsdorfer, LLC

December 23, 2020 11:40 EDT

IRS Introduces a New 1099 Form for Non-Employee Compensation (Form 1099-NEC)

By Mark M. Brandsdorfer, Esq.

In past years, most entities that paid compensation to non-employees (i.e. contractors) reported this on Form 1099-MISC Miscellaneous Income (Box 7). However, for Tax Year 2020, the IRS has introduced a new form for reporting non-employee compensation (NEC), Form 1099-NEC Non-employee Compensation.

Highlights of Form 1099-NEC:

  1. Minimum amounts requiring filing of a 1099-NEC are any gross payments of at least $600 or more in: (1) services performed by someone who is not your employee (including parts and materials); (2) cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish; or (3) payments to an attorney.
  2. Form recipient mailing deadline and paper or electronic filing deadlines are February 1st.
  3. Automatic filing extensions are not available.
  4. This form does not participate in the Combined Federal/State Filing Program (CF/SF).
  5. Filers may be required by their states to directly file and report NEC to the states. You should contact states well in advance of the filing deadlines to determine your obligations.
  6. You must also file Form 1099-NEC for each person from whom you have withheld any federal income tax (reported in box 4) under the backup withholding rules regardless of the amount of the payment.

Also note that Form 1096, Annual Summary and Transmittal of U.S. Information Returns, has been updated to add Form 1099-NEC to the list of forms that are filed under Form 1096. If you use computer completed forms to prepare your Form 1096, care should be taken to ensure that the most up-to-date version of your software properly accounts for the addition of this new box on Form 1096.


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