The IRS has reintroduced Form 1099-NEC as the new way to report self-employment income instead of Form 1099-MISC as traditionally had been used. This was done to help clarify the separate filing deadlines on Form 1099-MISC and the new 1099-NEC form will be used starting with the 2020 tax year.
There is a new tax form, 1099-NEC, used to report non-employee compensation paid in 2020. Beginning with tax year 2020, use this form instead of Form 1099-MISC to report this kind of compensation. Here’s what you need to know about the new form, when to use it, and what happened to Form 1099-MISC.
What info is on Form 1099-NEC?
The new Form 1099-NEC is used to report any compensation paid to non-employees by a company. The IRS separated this income from Form 1099-MISC.
There are five sections of Form 1099-NEC:
- Payer’s information
- Recipient’s information
- Non-employee compensation amount
- Federal income tax withheld
- State information
Non-employee compensation will be reported in Box 1.
Box 4 will report any federal income tax withheld. This box should be blank unless you had backup withholding.
Box 5 will report any state income tax that was withheld from the compensation.
See the full form here.
What is non-employee compensation?
Non-employee compensation is defined as money you paid to an independent contractor who performs work for you.
Common examples include:
- Awards for services
What is the difference between Form 1099-NEC and Form 1099-MISC?
Prior to 2020, Form 1099-MISC was used to report payments, including non-employee compensation. Beginning with tax year 2020, non-employee compensation is no longer being reported on Form 1099-MISC. Instead, employers will use the new form, 1099-NEC.
I’m a business owner. Do I need to file Form 1099-NEC for my workers?
All businesses are required to file Form 1099-NEC form for non-employee compensation if the following conditions are met:
- You paid someone who is not your employee
- You paid for services rendered during trade or business (including government agencies and nonprofit organizations)
- You paid an individual, a partnership, an estate, or, in some cases, a corporation
- You paid at least $600 to the individual during the tax year
You must file Form 1099-NEC for anyone you had backup withholdings for, even if the amount was less than $600.
Where do I get Form 1099-NEC?
Download a copy here.
When is Form 1099-NEC due?
Employers are required to send Form 1099-NEC to the taxpayer and file a copy with the IRS by February 1 in 2021.
What do I do if I don’t receive Form 1099-NEC?
If you haven’t received your form by February 1, 2021, contact the company you performed work for directly to request it. You will need the form to file your 2020 taxes, so you must contact the company promptly.
Can I e-file Form 1099-NEC?
Yes, you can file Form 1099-NEC electronically with TaxSlayer.
How has Form 1099-MISC changed in 2020?
The 1099-MISC was redesigned to reflect the changes we mentioned above. The biggest update to the form was made to Box 7, which was used for reporting non-employee compensation. Now Box 7 reports direct sales of $5,000 or more.