In recent years, non-employee compensation was reported in Box 7 of the 1099-MISC form, that box now goes away. Instead, the 1099-NEC form Box 1 will be used to report non-employee compensation only. Other kinds of payments should be reported using the other 1099 forms (1099-MISC, 1099-INT, etc.).

The 1099-NEC does have a Box 2 on the form, which reads: “Payer made direct sales totaling $5,000 or more of consumer products to recipient for resale.” The other boxes on the 1099-NEC form are used to report any backup withholding, or state income tax withheld.

Form 1099-NEC has been re-introduced due to 2015 legislation which changed the due dates for reporting certain data, causing penalties for late filing which can now be avoided by using the different forms. Therefore, 1099-NEC is due the last day of January 2021, while the 1099-MISC form is due the last day of February 2021.

Finally, unlike the 1099-MISC, the 1099-NEC will not be included in the program where the IRS shares 1099 filing data with states.

Key Takeaways

• There is a new form for non-employee compensation, the 1099-NEC
• The 1099-MISC form has been redesigned – box numbers and locations have changed
• There are different due dates for the 1099-NEC and the 1099-MISC
• The 1099-NEC will not be shared by with IRS to States

1099-NEC: Use For

• Non Employee Compensation for Independent Contractors of $600 or more
• Someone who is not an employee, who provided services
• Can go to an individual, parternship, estate, or corporation
• Should inlcude payments for services AND payments for parts or materials used to perform the services

Examples: Attorneys, Architects, Accountants, Graphic Designer, Web Developer, IT consultant, freelance writer, non-employee sales commissions, freelance contractors, benefits consultant and directors’ fees.

Filing Due Date: 1/31/2021

1099-MISC: Use For

Royalties, Rents, Prizes and Awards, Other Income Payments, Medical and healthcare payments, etc.

Filing Due Date: 2/28/2021

For more info please visit: https://www.accountingweb.com/tax/business-tax/the-new-form-1099-nec-summarized

The post The New Form 1099-NEC appeared first on Salt Lake City's CPA's.

In actuality, the new Form 1099-NEC isn’t entirely “new.” It’s an updated version of a form that was discontinued in the 1980s. But this new form may cause some unexpected headaches for business filers next year.

Background information: Previously, business entities used Form 1099-MISC to report payments totaling at least $600 in a calendar year for services performed in a trade or business by someone who isn’t treated as an employee. Yet, there are numerous other uses for Form 1099-MISC.

For instance, a business must report other income, like bonuses paid to salespeople at car dealerships, in Box 3. The nonemployee compensation paid to outside workers was reported in Box 7.

Now Form 1099-NEC has been reintroduced to avoid confusion caused by separate deadlines for Form 1099-MISC reporting of nonemployee compensation in Box 7 and all other Forms 1099-MISC. As a result, the IRS announced last year that it was resurrecting Form 1099-NEC for the 2020 tax year and thereafter. Note that this change applies to businesses of all sizes ranging from corporate conglomerates to neighborhood delis and bakeries. 

Generally, payers must file Form 1099-NEC by January 31 of the year following the year in which the services were performed. In 2020, the filing deadline will be February 1, 2021 as January 31 will fall on a Sunday. Although there’s no automatic 30-day extension to file Form 1099-NEC, an extension to file may be available for taxpayers experiencing hardships.

Another wrinkle: According to Publication 1220 recently released by the IRS, the restored Form 1099-NEC won’t be covered by the IRS 1099 Combined Federal/State Filing Program (CF/SF). Under the CF/SF Program, the IRS forwards data from certain key forms to the appropriate states.

Without this assistance, business entities may end up scrambling to meet state filing requirements or deadlines. The exact rules vary from state-to-state. Be forewarned!

For more information please visit: https://www.accountingweb.com/tax/irs/form-1099-nec-officially-replaces-1099-misc-for-reporting-payments-to-nonemployees

The post Form 1099-NEC Officially Replaces 1099-MISC for Reporting Payments to Nonemployees appeared first on Salt Lake City's CPA's.