Instructions to file 1099-MISC and 1099-NEC forms during 2020-21 tax year

Is your company planning to compensate non-employees in 2020? Take a look at the IRS tax forms latest updates. The IRS has declared Forms for 1099-NEC and 1099-MISC. The year-end reporting of 1099 for the year 2020 for non-employee compensation will not be on the 1099-MISC Form in box 7. As an alternative, the Form 1099-NEC filing is crucial. The IRS issued such updates exclusively for Non-employee compensation for a better-streamlined process and to alleviate confusion.

Instructions for filing1099-NEC and MISC Forms

Instructions for filing Form 1099-NEC

Starting with the 2020 tax year, Form 1099-NEC is obligatory for reporting non-employee compensation. The 1099-NEC filing is vital if the below criteria are fulfilled:

    • If payments to the payee in the tax year are at least $600.
    • For making payments to others apart from employees.
    • Expenses regarding the services offered to business or trade to non-profit or government organizations.
    • For paying money to an estate, partnership, individual, or corporation.

Tax filers should bear in mind that personal payments do not fall under 1099-NEC reporting. The form is vital only for business payment and trade for profit. Few examples include,

    • Payment of fees from one professional to the other.
    • Making payments to independent contractors.
    • Paying fees to professional service providers, including accountants and attorneys.
    • Non-employee salesperson commission payment contingent to repayment, wherein repayments are unsuccessful in the calendar year.

Taxpayers must present form 1099-NEC with the IRS by January 31. Electronic filing or paper filing is a possible way.

Instructions for filing form 1099-MISC

For the tax year 2020, employers should opt for form 1099-MISC for the following payments made in business during the year.

    • An amount of $600 for
    • Awards and prizes
    • Rents
    • For fishing boat proceeds
    • Income payments
    • Proceeds for crop insurance
    • Money from notional principal contract to an estate, partnership, or an individual.
    • Making payment for medical and healthcare.
    • Deferrals for section 409A
    • Payments towards attorney
    • Nonqualified deferred compensation.
    • Form 1099-MISC is necessary if you have made a payment of $10 in broker payments or royalties as a replacement for tax-exempt interests or dividends.

Furnishing form 1099-MISC to receipts is crucial by January 31. Also, February 28 is the deadline to file with the IRS.

Major Changes in the 1099 Form Series

Tax professionals must make a note of the prime changes of 2020 IRS form 1099-MISC. For tax filers, usually filing form 1099-MISC with box 7, needs to file form 1099-NEC for the 2020 tax year. The 1099-MISC that uses box no 7 for acquiring data for non-employee compensation will be taken over by Form 1099-NEC. The capturing of payments to non-employee service providers such as vendors, independent contractors, consultants, and freelancers must use form 1099-NEC.

It is clear and evident that many businesses need both forms. The 1099-NEC is mainly for independent contractor reporting payments of $600 or additional in their business. Remember that 1099-MISC is mandatory for items such as rent, royalties, and healthcare payments. If there are queries regarding these Forms, do not hesitate to reach Tax2efile.com for assistance.

 

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