• IRS Introduces the New Form 1099-NEC

    • Share:
    December 24, 2020

    IRS Introduces the New Form 1099-NEC

     

    The IRS has introduced a new Form 1099-NEC, Nonemployee Compensation. It's a sibling to Form 1099-MISC and replaces it for certain purposes. You must file it for each person in the course of your business to whom you have paid at least $600 during the year for the following: 

    • Services performed by someone who is not your employee (including parts and materials) (box 1).
    • Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish (box 1).
    • Payments to an attorney (box 1).

    The IRS has provided additional guidance about what exactly is nonemployee compensation. If the situation meets all four of the following cases, it's an NEC situation:

    • You made the payment to someone who is not your employee.
    • You made the payment for services in the course of your trade or business (including government agencies and nonprofit organizations).
    • You made the payment to an individual, partnership, estate or, in some cases, a corporation.
    • You made payments to the payee of at least $600 during the year.

    A partial list of payments that belong on a Form 1099-NEC includes the following:

    • Professional service fees, such as fees to attorneys (including corporations), accountants, architects, contractors, engineers, etc.
    • Fees paid by one professional to another, such as fee-splitting or referral fees.
    • Commissions paid to nonemployee salespersons that are subject to repayment but are not repaid during the calendar year.
    • 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. (To help you determine whether someone is an independent contractor or an employee, see Pub. 15-A.)

    This is not a complete list, and the choice between the NEC and MISC forms can be confusing. Be sure to keep clear, comprehensive records so your tax professional can help you decide how various payments should be reported. Form 1099-NEC is due on Jan. 31 or the next business day if that date falls on a weekend or holiday.


    Source:
    SHS Services, LLC
    131 Rollins Ave.
    Rockville, MD 20852
    www.SHSServices.com