Beginning with the 2020 reporting year, you must report nonemployee compensation (NEC) on the newly created Form 1099-NEC.
Generally, if the following four conditions are met, you must report a payment as NEC:
- You made a payment to someone who is not your employee.
- You made a payment for services in the course of your trade or business, including government agencies and nonprofit organizations.
- You made a payment to an individual, a partnership, an estate, or, in some cases, a corporation.
- You made payments to a payee of at least $600 during the year.
Due dates for filing 2020 Form 1099-NEC by paper or electronically is February 1, 2021 (January 31 falls on a weekend). Taxpayers filing 250 or more 1099-NEC forms must electronically file.
Prior to Form 1099-NEC, nonemployee compensation was reported on Form 1099-MISC, Miscellaneous Income, which has been renamed Form 1099-MISC, Miscellaneous Information. Although Form 1099-MISC will no longer be used to report nonemployee compensation, it will still be used to report rents, employee prizes and awards, employee other income payments, fishing boat proceeds, employee medical and health care payments, crop insurance proceeds, gross proceeds to an attorney (payments to attorneys are included on the new Form 1099-NEC), section 409A deferrals, and nonqualified deferred compensation.
If you wish to discuss any of the matters in this update in more detail, please contact Chuck Marston, Rich Pacella, Danelle Stewart, or Shawn Drwal at email@example.com, firstname.lastname@example.org, email@example.com, or firstname.lastname@example.org or 724-934-0344.