Just the Tax: The New Form 1099-NEC
It’s 1099 season already! Because the Internal Revenue Service apparently didn’t have enough to do, this year they have introduced a “new” IRS Form 1099 that you might not recognize - Form 1099-NEC. This new form essentially separates many of the traditional reporting required on Form 1099-MISC. Along with the new form, the IRS also changed a filing deadline and provisions for automatic extensions.
This applies to me if ...
You made payments for services of more than $600 dollars to an individual, estate, partnership, or LLC in the course of your business in 2020.
You’re an individual, estate, partnership, or LLC who received payments of more than $600 from a business.
You love tax forms.
What’s new?
For those of us used to sending or receiving Form 1099-MISC, the Internal Revenue Service dusted off a form they haven’t used since 1982, the “1099-NEC” (which stands for nonemployee compensation). This is now the form used to report most business to business transactions. (For those of us who are nostalgic, Form 1099-MISC is still around but it is now only used for reporting rent paid, legal settlements or prize and award winnings).
Why should I care?
While the information required to be reported on Form 1099-NEC hasn’t changed, it could cause confusion for both those of us used to sending and those of us who receive Form 1099-MISC. While the IRS most likely won’t penalize you for using the wrong form, it is still important to ensure that your reporting follows the latest IRS guidance.
It is important to note there is a subtle but important change in the new 1099-NEC form. Unlike the 1099-MISC, 1099-NEC must be sent to the recipient and to the IRS by February 1, 2021 (1099-MISC gives you an extra month to send it to the IRS). And, unlike prior years, a request for an extension to file the form is not “automatic” but requires a showing of cause as to why the filer needs an extension.
For more information
https://www.irs.gov/newsroom/irs-to-employers-remember-february-1-2021-deadline-for-form-w-2-other-wage-statements
How can we help?
Just like payroll reporting, 1099 reporting comes as a surprise to many businesses. While it’s not difficult, it’s another task in the life of a busy business owner that doesn't create revenue or growth. If you have a monthly retainer with us, we already have you covered. If not, let us know if you’d like help or have additional questions. It’s what we’re here for.
The fine print
We draft these Tax Tips to assist you. That said, they do not consist of tax advice nor are they intended to be a comprehensive summary of the tax law. If you have specific questions please let us know and we are always happy to assist you.