The Protecting Americans from Tax Hikes (PATH) Act of 2015 changed the due date for filing any Form 1099 that includes nonemployee compensation (NEC) and removed the automatic 30-day extension.
Since this created different Form 1099-MISC due dates, depending on whether NEC was reported, the IRS created a new Form 1099-NEC beginning with the tax year 2020. The filing due date for 1099-NEC is the last day of January, 1/31/21.
Any business or trade must use box 1 on Form 1099-NEC to report NEC of $600 or more. This includes anything paid to an individual who is not an employee, such as fees, commissions, prizes and awards, or other forms of compensation for services (like payments for parts or materials used to perform services). Directors’ fees and other remuneration like payments made after retirement must also be reported in the year paid.
Previously, NEC was reported in Box 7 of the 1099-MISC form. Form 1099-MISC has been revised in light of the new Form 1099-NEC, with box numbers and locations changed. However, 1099-MISC still applies to Miscellaneous Income, and other kinds of payments should be reported using the other 1099 forms (1099-MISC, 1099-INT, etc).
Finally, it is worth noting that liability concerns are slightly mitigated because the IRS claims that the information regarding the 1099-NEC will not be shared by the IRS with States.
Need more information about how the 1099 changes will impact your business? Reach out to Allen Bradley at firstname.lastname@example.org today.