Recently the IRS released the draft of 1099-NEC, which is considered to be the replacement of Form 1099-MISC Box 7 to report the non-employee compensation and Box 9 to report the direct sales about $5,000 or more.
The NEC can reduce the confusion that caused after the passage of PATH Act in 2015. As per the PATH Act, the deadlines to report to report Form 1099 MISC Box 7 is dated from 31st March to 31st January. But the end date for non-Box 7 Form 1099 is 31st March. There are two different end dates for a single form.
Draft of 1099 NEC as a replacement for 1099 MISC Box 7
The NEC replaces Form 1099 MISC Box 7 as replacement form for Form 1099 MISC to report nonemployee compensation. But 1099 Form MISC is used to report other compensation types and the updated or the newer version of the 1099 Form MISC is not yet released by the IRS.
Till now, the due date to report the Form 1099 NEC is 31st January and the due date to file the Form 1099 MISC is 31st March. However, separate due dates for each of the Form is likely to be announced in 2021.
IRS about the Form 1099 MISC
This newer Form enables the tax filers to file the Form on time so that it reduces the fine and penalties from the IRS. As per the new regulations, when a tax filer submits the Box 7 of Form 1099 MISC lately along with the NON-box 7 forms then the IRS counts all the Non-box 7 Form 1099-MISC is submitted lately, even though it was filed on time. Listing below few of the criteria to be noted:
When the tax filer submits the Box 7 Form by 31st January to the IRS before the given deadline.
Late box 7 submission after 31st January.
When the tax filer sends the non-box 7 Form to the IRS by 31st March, before the due date of non-box 7 Form.
In same set of non-box 7 forms, the tax filer submits the late box 7 form 1099 MISC.
The last point may attract the penalties due to late submission as the late submission of box 7 along with non-box 7 form will be considered late submission by the IRS and it is subjected to penalties. But the new draft of 1099 NEC Form can eradicate these confusions among the tax payers as it separates the forms. This is an indication that the IRS is concerned about the tax payers related to the PATH act.