For Non-employee compensation reporting, form 1099-NEC was in use. Do you know about the new 2020 Form 1099 NEC? Here’s a peek about the latest Form 1099-NEC.
What is 1099 MISC?
Miscellaneous income form 1099-MISC is known as an information return business for reporting payment types. Payments made to independent contractors fall under this category. Payment categories such as rents and royalties use form 1099-MISC.
Form 1099-MISC is similar to W2 but meant only for independent contractors. Independent contractors utilize form 1099-MISC for tax payments according to their business payment in the year. If you paid $600 or more to any contractor, then send form 1099-MISC to the contractor. Filing form 1099-MISC is also applicable if any of the below payment above $600.
- Medical and health care payments
- Fishing boat proceeds
- Crop insurance proceeds
- Substitute payments for interests and dividends
- Gross proceeds paid to an attorney
- Excess gold parachute payments
What is form 1099 NEC?
For Non-employee compensation reporting, the form 1099 NEC is applicable. The use of 1099-NEC is for replacing the usage of form 1099-MISC specifically for filing independent contractor payment. The aforementioned isn’t a new form. The Form 1099-NEC was lastly in use in 1982. In 2020, the IRS is revising Form 1099 again. Do you know why Form 1099-NEC is back?
Replacing 1099 MISC with 1099-NEC
- Usually, taxpayers utilize one form. The form 1099-MISC was mainly for reporting miscellaneous income and Non-employee compensation by February 28th every year.
- The PATH Act was made known in 2015. This act changed the due dates of form 1099-MISC to January 31st for filing non-employee compensation.
- The due date change brought in confusion.
- Taxpayers used separate form 1099 for Non-employee compensation.
- The above was concerning for both the employers and taxpayers.
- Also, the forms given after January 31st deadlines were said to be late returns.
- Hence the form 1099-NEC is back to separate non-employee expenses.
- Before 2020, tax filers use box 7 in 1099 MISC for including non-employee compensation.
- In 2020 reporting of non-employee compensation is possible with form 1099-NEC.
Reporting with Form 1099 NEC
You all know that form 1099 NEC is for reporting non-employee compensation. The below payment types of independent contractors fall under non-employee compensation.
- Another form of compensation for services
Suppose you are paying independent contractor non-employee compensation, remember to separate non-employee compensation payments from all your form 1099-MISC payments. From 2020, fill form 1099 NEC if you have paid workers with $600 or more for non-employee compensation.
Hope the information is clear about 1099 MISC and 1099 NEC. The new form 1099 NEC and its necessity are known. With the assistance of tax2efile.com, taxpayers file tax promptly. It just takes a few steps to file with tax2efile.com. The help desk is always available for help in case of any queries. Hence tax filers can either register if they do not have a login. File your tax returns within the deadline easily with Tax2efile.com.