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IRS Introduces New 1099-NEC Form to Report Nonemployee Compensation

by Dominick Bellia, CPA, CITP on September 28, 2020 in Taxation-Corporate, Taxation-Individuals

Beginning with Tax Year 2020, the IRS requires payments over $600 to nonemployees to be reported on the new Form 1099-NEC (Nonemployee Compensation). In prior years, these payments were reported on 1099-MISC.

Why the new form?

In prior years, the due date for Forms 1099-MISC depended on whether any nonemployee compensation was reported in Box 7. If so, the due date was January 31; otherwise the due date was February 28.

The new form 1099-NEC was introduced to alleviate the separate deadlines for the same form.

1099-NEC: What is reported?

Generally, the payments formerly reported in Form 1099-MISC, Box 7 will be shifted to Form 1099-NEC, Box 1.

The full amount of the payment to a nonemployee must be reported on Box 1 of Form 1099-NEC and should include fees, commissions, prizes and awards, other forms of compensation for services performed, and expenses incurred for the use of an entertainment facility that you treat as compensation to a nonemployee. A Form 1099-NEC is only required if total payments during the calendar year exceed $600 to the recipient.

Examples of income to report include:

  • Payment for services, including payment for parts or materials used to perform the services if supplying the parts or materials was incidental to providing the service.
  • A fee paid to a nonemployee, including an independent contractor, or travel reimbursement for which the nonemployee did not account to the payer, if the fee and reimbursement total at least $600.
  • Professional service fees, such as fees to attorneys (including corporations), accountants, architects, contractors, engineers, etc.
  • Directors’ fees

1099-MISC: What has changed?

All income typically reported on Form 1099-MISC other than nonemployee compensation will continue to be reported on the same form. Boxes 7 through 17 have been shuffled to remove the former Box 7 for nonemployee compensation, while Box 1 for rents and Box 3 for other income remain unchanged.

Form 1099-MISC must be filed for each person from whom businesses have withheld any federal income tax (Box 4) under the backup withholding rules, regardless of the amount of the payment.

A 30-day extension may be granted for Forms 1099-MISC but no extension is available for Forms 1099-NEC, unless due to disaster.

Please complete the form below if you’d like our team to follow up about Form 1099-NEC. 

Councilor, Buchanan & Mitchell (CBM) is a professional services firm delivering tax, accounting and business advisory expertise throughout the Mid-Atlantic region from offices in Bethesda, MD and Washington, DC.