What you need to know about the new 1099-NEC

By Fournier ABS | November 13, 2020

If you own a business or are a freelancer/subcontractor to businesses, you are most likely very familiar with the 1099-MISC form.  This form has been used for the past 30+ years to report certain payments including payments to subcontractors, freelancers, service providers, landlords and attorneys.

As if there haven’t been enough changes in 2020, there one more, and it is an important change in how you will report those typical Box 7, Nonemployee 1099-MISC payments you made this year.  Those payments will no longer be reported on Form 1099-MISC but will now be reported on Form 1099-NEC.

What is reported on the new 1099-NEC? 

If the following four conditions are met, you most likely need to report the payments as nonemployee compensation on the 1099-NEC.

  • Payments made to someone who is not your employee
  • Payments made to services in the course of your trade or business
  • Payments made to an individual, partnership, estate or corporation
  • The payment totals at least $600.00 for the year.

Also, currently the IRS is not including the 1099-NEC in the IRS 1099 Combined Federal/State Filing Program.  Under this program the IRS forwards a number of key forms to the necessary state taxing entities.  They are not doing that with the 1099-NEC.  So you need to make sure your accountant, vendor, or software will also file the form with the appropriate states.

What is still being reported on the 1099-MISC?

According to the IRS, payments that should still be reported on Form 1099-MISC include:

  • Rent payments of at least $600.00
  • Prizes and awards
  • Payments to an attorney
  • Medical and health payments

 What has not changed?

What has not changed is the exclusion of payments made by credit card, payment card, or via a third-party network are not subject to reporting on Form 1099-NEC nor 1099-MISC.  Those payments will still be reported on the 1099-K by the credit card companies or third-party networks.

You can find the full list and instructions for both Form 1099-MISC and Form 1099-NEC at: https://www.irs.gov/instructions/i1099msc.

To sum up the changes, if you would have reported payments in Box 7 of the Form 1099-MISC last year, this year you will most likely be issuing a 1099-NEC instead.

 

Accounting & Bookkeeping Services in NH

If you need support with your accounting and bookkeeping the experts at Fournier Accounting & Bookkeeping Services are here to help.  We serve small businesses throughout New Hampshire and the U.S.  Contact us today!

 

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