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Form 1099-NEC 2020-2021: Tax tips that eliminate headaches

In recent years, the IRS has discovered significant fraud by individuals filing tax returns with numerous refund requests using falsified Forms 1099-MISC. To avoid this, the IRS developed a new policy and extended the deadline for reporting IRS Form 1099-MISC compensation for non-employees to January 31st. At the start of 2020s reporting year, non-employee compensation will be noted on the newly created Form 1099-NEC. For more details, continue reading.

 

How To Guide

Follow the quick steps on how to fill out the 1099 NEC in minutes:

1. Click Get Form to open it in the editor and start completing it.

2. Please note that Copy A is provided for informational purposes only.

3. Scroll down to start filling out Copy 1 for the State Tax Department and the following copies for the Recipient and Payer.

4. Navigate from one fillable field to another and complete them with the help of the pop-up tips.

5. Enter the required information carefully (text, numbers, checkmarks); follow the instructions in the pop-ups.

6. For your protection, show only the four last digits of your TIN/SSN. However, the issuer (Client) has already reported your complete TIN to the IRS.

7. Double-check the information provided to prevent penalties because of errors. 

8. Click Done when finished.

9. Proceed to send out the report and save Copy B for your records. 

What is IRS Form 1099-NEC?

The Internal Revenue Service has reinstituted Form 1099-NEC as a new way to provide data on self-employment income instead of 1099-MISC, as it has done before. Companies will now have to use this template if they have made payments totaling $600 or more to a non-in-house worker, such as an independent contractor.

If you are self-employed, you can expect to receive this new report from a business you have worked with by January 31st of each year (February 1, 2021, since January 31st falls on a Sunday) and use it to prepare your tax return.

Who needs to submit Nonemployee Compensation?

Any company that makes payments totaling $600 or more to at least one individual who is not an employee will now use this updated form to report that payment. Additionally, businesses will need to complete Form 1099-NEC when they pay any individual at least $10 in fees or when any federal income tax withheld, regardless of the amount paid for the year.

When is the 1099 NEC due date?

Taxpayers must file their forms no later than February 1, 2021, using paper or electronic methods. Electronic filing is mandatory for those companies that file 250 or more documents. The updated MISC form must be filed in paper form by March 1, 2021, and March 31, 2021, if filed electronically.

 

1099-NEC vs. 1099-MISC: what’s the difference?

 

IRS Form 1099-NEC replaces 1099-MISC for non-employees starting in the 2020 tax year. Form 1099-MISC is still used for other purposes, but now, independent contractors have a separate form instead of Box 7 of the MISC-type report.

The complete guide & screenshots on how to prepare the 1099-NEC report 

The document itself is straightforward to prepare. You can quickly fill out the blanks online on our website. The main point is to know a few things: 

 

1. The form consists of several copies, each of which has its own purpose. 

2. Copy A is for information only; the official form should be requested from the IRS. 

3. Copy B and the following pages can be filled in here online, emailed, or printed.

 

Fill out the form according to the Instructions for Form 1099-MISC and Form 1099-NEC and General Instructions for Certain Information Returns.

 

IRS Form 1099-NEC and its components

 

The Nonemployee Compensation form is relatively short, but it has several copies: 

 

 1. Copy A for the Internal Revenue Service. It appears in red similar to the official IRS template. The official version of the Copy A is scalable, but the sample from this website is not. It’s provided for informational purposes only.

2.Copy 1 for the State Tax Department.

3.Copy B is for the Recipient.

4.Copy 2 is the sample filed with the recipient’s state income tax return when required.

5. Copy C is for Payer.

 

FAQ

 

What is nonemployee compensation?

 

These are payments for services provided for your trade or business by those who aren’t employees. Non-employee compensation can include fees, commissions, prizes, benefits, and awards for freelancers’ jobs. 

 

Can I file 1099 NEC online?

You can submit Form 1099-NEC to the IRS by mail or online, using the Filing Information Returns Electronically (FIRE) system. Check details with the Internal Revenue Service before filing the report. 

 

Where can I get a 1099 NEC form?

 

To order official IRS information returns, which include a scalable Copy A, visit www.IRS.gov/orderforms. Other fillable copies of the 1099-NEC are available on this website. Go back to the top of the page and click Get Form to start completing your report. 

 

What if you don't file non-employee compensation on time?

 

If you fail to provide the right form to the right agency before the due date, you will be subject to penalties. The greater the delay in filing, the greater the penalty you will be assessed.

What form should I use 1099 MISC or 1099 NEC?

Use 1099-MISC to report different income such as rent, payments to attorneys, or royalties. Payments to non-in-house contractors made in 2020 and later will be reflected on the new Form 1099-NEC. If freelancers work for you, you must provide them this document by February 1, 2021. If you are a freelancer, you will get this version of the template from your client to prepare your tax return. 

 

Hi and welcome to our presentation on the 2020 instructions for form 1099 NEC if you're a business owner or tax professional it's time to get familiar with the 2020 1099 NEC form from the IRS beginning with tax year 2020 this form replaces form 1099 miscellaneous for reporting non-employee compensation which was previously captured in box 7 of the 1099 miscellaneous form the new 1099 NEC stands for non-employee compensation is based on an old form that's been out of use since 1982 to use the reinstated 1099 NEC properly you need to understand what is considered non-employee compensation so what is non-employee compensation any payments to non-employee service providers such as independent contractors freelancers vendors consultants and other self-employed individuals commonly referred to as 1099 workers according to the IRS if the following four conditions are met you must generally report a payment as non-employee compensation one it is made to someone who is not your employee two it is made for services in the course of your trade or business three it was made to an individual partnership estate or in some cases a corporation and finally the payment was 600 or more for the calendar year here is a closer look at the actual 1099 NEC beyond the sections for payers and recipient information there's the all-important box one to indicate any non-employee compensation as already described be aware of box 4 as you must also file form 1099-nec for each person from whom you have withheld at a federal income tax under the backup withholding rules regardless of the amount of the payment now that you're more familiar with the purpose and appearance of the 1099-nec let's go over some important dos and don'ts do verify that the recipient's taxpayer ID is correct you'll need the form w-9 from each recipient with the current taxpayer ID before you complete form 1099-nec don't use it to report personal payments don't use it to report employee wages use form w-2 instead don't report gross proceeds to an attorney as opposed to fees on the 1099-nec use form 1099-miscellaneous instead and lastly don't use it to report rent payments to real estate agents or property managers again use the 1099 miscellaneous instead finally let me share some tips for filing and submitting the 1099 NEC you must distribute the form to recipients by January first for two thousand twenty-one the date is February first since January thirty-first falls on a Sunday you must file with the IRS by the same date again February first two thousand twenty-one through paper or electronic filing one final thing to remember regarding electronic filing for tax year 2020 any business with a hundred or more forms are required to e-file because of the 2019 taxpayer first act many businesses will no longer be able to submit paper forms thank you for attending our presentation