Update: IRS releases draft of new Form 1099-NECJuly 26, 2019
Draft of Form 1099-NEC
IRS has released a draft of a new form, Form 1099-NEC, Nonemployee Compensation, to report nonemployee compensation paid in 2020. Previously, nonemployee compensation was reported on Form 1099-MISC, Miscellaneous Income.
Background. If the following four conditions are met, a payor must generally report a payment to the IRS as nonemployee compensation (NEC):
- The payor made the payment to someone who is not the payor’s employee.
- The payor made the payment for services in the course of the payor’s trade or business (including government agencies and nonprofit organizations).
- The payor made the payment to an individual, partnership, estate, or, in some cases, a corporation.
- The payor made payments to the payee of at least $600 during the year. (2019 Instructions to Form 1099-MISC)
For NEC payments made prior to 2020, NEC is reported on line 7 of Form 1099-MISC. (2019 Instructions to Form 1099-MISC)
For payments made before 2020, if a payor has made payments to an individual, other than NEC, that have to be reported on Form 1099-MISC, then the payor has to file the form with the IRS by March 31 following the year of payment. ( Code Sec. 6041 ; 2019 Instructions to Form 1099-MISC)
The Protecting Americans from Tax Hikes Act (Section 201(a)DivQ, PL 114-113 ) requires that, starting with payments made in 2017, a payor has to report NEC payments on or before January 31 of the year following the year of payment. ( Code Sec. 6071(c) )
So, for payments made prior to 2020, if a payor is reporting both NEC payments and other payments that must be reported on Form 1099-MISC, then the payor must file the form by January 31, not March 31. (2019 Instructions to Form 1099-MISC)
New form 1099-NEC. The IRS has released a draft of a new form, Form 1099-NEC, Nonemployee Compensation, to report NEC payments made during 2020.
Observation. While a draft of the Form 1099-MISC for 2020 has not been released yet, presumably it will not include a line to report NEC. This will reduce the confusion that a payor might have as to whether the payor has to file the form by January 31 or March 31.
The instructions for the draft Form 1099-NEC state that a payor must file a copy of it with the IRS by February 1, 2021.
Observation. January 31, 2021 is a Sunday.
The draft Form 1099-NEC does not ask for any other information than was not asked for on Form 1099-MISC.