Attention 1099 Filers - New 1099-NEC Form due before February 1, 2021
Anyone or any business that has filed or should be filing Forms 1099-MISC must be aware of this year’s big change.
The IRS now requires Form 1099-NEC for reporting non-employee compensation.
This is what used to show up in Box 7 of Form 1099-MISC.
Another important item is the filing deadline for Form 1099-NEC is February 1st.
Filing late starts the penalty routine at $280 per item. That can become VERY expensive if you must file a lot of these forms.
Form 1099-NEC reports non-employee compensation and any related taxes withheld on that income. It is required when you pay for services, payments to an attorney, cash payments for fish and/or have federal backup withholding. The threshold is a mere $600 per payee per year.
These are payments made in the course of your trade or business. For example, you don’t have to issue Form 1099-NEC for your home lawn care provider. But you will need to issue the forms to your independent contractors, architect, bookkeeper, engineer, accountant, entertainer, attorney and so for.
Corporation payees are EXCEPTED from this filing requirement (including LLCs taxed as C or S Corporations). Oil & Gas working interest payments are also reported on 1099-NEC.
So to briefly review:
1099-NEC reports payments made to someone who is NOT your employee made for services in the course of your trade or business and paid to an individual, partnership, trusts, or estates. Payments to attorneys must be included on 1099-NEC even if the firm is organized as a corporation.
Failure to file the form by February 1st will incur a $280 penalty per item or more (up to $580 per information return).
Steven Miller, CPA | 01/26/2021