The 3 Nonemployee Compensation Payments to Report on Form 1099-NEC Instead of 1099-MISC This Tax Season

Form 1099-NEC is a new 2020 tax form most businesses will need to file by January 31, 2021. Used to report nonemployee compensation paid during 2020, the new form replaces the 1099-MISC previously used to report these payments.

What Type of Payments Can You Report on Form 1099-NEC?

Form 1099-NEC should be used to report the following kinds of payments made from your trade or business during 2020:

1. For services performed by someone who is not your employee, and to whom you paid at least $600 (to be reported in box 1)
2. For services rendered by an attorney, for which you paid at least $600 (to be reported in box 1)
3. For federal tax withheld under the backup withholding rules, regardless of the amount of payment (to be reported in box 5).

What Payments Are NOT Reportable on Form 1099-NEC?

Personal payments are not reportable on Form 1099-NEC. Generally, payments made to a corporation also are not reportable here. However, note that if an attorney is set up as a corporation, this rule does not apply and you can report those payments on the form.

What is the Due Date for Filing Form 1099-NEC?

Form 1099-NEC is due to the recipient and the IRS by January 31, 2021. This filing date is earlier than that of the 2020 Form 1099-MISC. The IRS wants Form 1099-NEC filed at the same time as W-2s so they have most of the income that is being reported for individual tax returns by January 31, 2021. This will help the IRS verify the income of individuals earlier than it has been able to in the past.

>> Download 2020 Form 1099-NEC and the related instructions

Contact Laura White at lwhite@cohencpa.com or a member of your service team to discuss this topic further.

Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.