Use Form 1099-NEC to Report Non-employee Compensation in 2020
If you’ve been in business more than 38 years, you may remember form 1099-NEC. Prior to 1982, this was the form you used to report non-employee compensation. Now the IRS is re-introducing this form to replace Box 7* on Form 1099-MISC. So, starting with 2020, you must file Form 1099-NEC if you have paid more than $600 to an independent contractor.
Here’s a look at the revamped form:
Distributing Copies of the Form
The form has 5 parts. Distribute them as follows:
- Copy A: The IRS
- Copy 1: State tax department, if applicable
- Copy B: Independent contractor
- Copy 2: Independent contractor
- Copy C: Keep in your business records
When to File the Form
Starting in 2021, you must distribute forms to workers and file Copy A of the form with the IRS by February 1.
When to Use Form 1099-MISC
Form 1099-MISC is still in use. Beginning with tax year 2020, you should file Form 1099-MISC for each person to whom you have paid the following in the course of your business during the year:
- At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest.
- At least $600 in the following:
- Prizes and awards.
- Other income payments.
- Generally, cash from a notional principal contract to an individual, a partnership or an estate.
- Any fishing boat proceeds.
- Medical and health care payments.
- Crop insurance proceeds.
- Payments to an attorney.
- Section 409A deferrals.
- Nonqualified deferred compensation.
Let the Professionals Do It
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*In 2020, Box 7 on Form 1099-MISC is “Payer made direct sales of $5,000 or more of consumer products to a buyer (recipient) for resale.”