The filing of 2020 1099 forms will be a bit different compared to years prior. The 1099-MISC Form has historically been used to report payments, including nonemployee compensation, rents, and other income, to the IRS. Beginning with the 2020 tax year, the 1099-MISC has been redesigned to exclude the nonemployee compensation payments box and require filers to use the reinstated Form 1099-NEC. This reinstated Form was last used in 1982.
Previously, Non-Employee Compensation (NEC) was reported in box 7 of the 1099-MISC Form. Starting in 2020, Form 1099-NEC will be used to report only nonemployee compensation. Like the Form 1099-MISC, the left side of the 1099-NEC Form will note the business’ (payer) name, address, and tax ID. The recipient’s legal name, address, and tax identification number are also reported on the left.
- Box 1 – on the right side of the Form is where nonemployee compensation amounts paid are reported.
- Box 4 – report the amount of any federal income tax withheld for the recipient.
- Boxes 5, 6, and 7 – used to report state tax withheld, state, state identification number, and state income. These requirements will vary by state.
Common examples of nonemployee compensation include the following payments to nonemployees (Independent Contractors) for:
- Professional service fees
- Payments for services
- Commissions paid to nonemployee salespeople
The 1099-NEC is required to be issued when payments during the year total $600 or more to each nonemployee individual. The deadline to file with the IRS and issue to recipients is February 1st, 2021.
Now that nonemployee compensation is filed with the 1099-NEC, the IRS has relocated and added boxes on the 1099-MISC Form. Below are typical examples of payments to include on the 1099-MISC and the new location of boxes.
- Other income
- Awards or prizes
- Fishing boat proceeds
- Medical/healthcare payments
- Substitute payments in place of dividends or interest
- Crop insurance proceeds (now located in box 9)
- Gross proceeds (not fees) paid to an attorney (now located in box 10)
- Section 409A deferrals (new this year – located in box 12)
- Excess golden parachute payments
- Nonqualified deferred compensation (new this year – located in box 14)
- Payer made direct sales of $5,000 or more (checkbox – now located in box 7)
- State tax withheld, state identification number, and amount of income earned in state reported in box 15, 16, and 17, respectively (in prior years, these were in boxes 16, 17, and 18)
The 1099-MISC is required to be issued when payments during the year total $600 or more to each recipient. The deadline to file with the IRS and issue to recipients is February 1st, 2021.
Electronic filing for 1099-MISC and 1099-NEC can be done using the IRS FIRE (Filing Information Returns Electronically) system. For tax year 2020, the electronic filing threshold is 100 forms. This means any business with 100 forms or more is required to e-file.