Changes to the 1099MISC
Historically, the 1099MISC was used to report Nonemployee Compensation. In 2020, the Nonemployee Compensation Box is being removed and moved to its own form, 1099NEC. This form was discontinued in the 1980s, but is being resurrected to make reporting nonemployee compensation easier and more efficient.
The 1099MISC will have minimal changes other than the removal of the Nonemployee Compensation box. A few boxes have shuffled around, though, so read carefully when filling out the form.
1099NEC is now its own form
Box 7 on the 1099MISC form will now be Box 1 on the 1099NEC form. The 1099NEC is remarkably simple to fill out. Box 1 is where you input the compensation for services rendered paid by check, debit/ACH, VENMO or cash – not credit card or PayPal totaling $600 or more. Boxes 4 through 7 are for the reporting of taxes withheld, although this is rare it can now be reported on this form.
Who gets a 1099NEC?
If you have made payments to someone who is not your employee, for services, that were $600 or more for the calendar year, you need to send them a 1099NEC at the beginning of the next calendar year.
More information and details
Before sending out a 1099NEC, you need to make sure you have all the proper paperwork on file. A completed W-9 is needed in order to fill out a 1099NEC or 1099MISC. A W-9 keeps record of the name, current address, and taxpayer identification number. All this information is needed to process any 1099 Form. It is easiest to require this form before making any payments. This way your paperwork is in order at year end.
The 1099NEC form is only used to record nonemployee compensation. It is not used to report gross proceeds to an attorney, report employee wages, or to report payments of rent. To report payments of rent or gross proceeds to an attorney, you should still use the 1099MISC form. To report employee wages, the usual W2 form should be used.
Both forms are due to the IRS and to the recipients on January 31st. However, since January 31st falls on a Sunday for 2021. The due date for both forms next year will be February 1st. There is no automatic 30-day extension for filing the 1099NEC. Although you will be able to file an extension, if necessary.