2020 1099 Changes

The IRS has introduced a new Form 1099 for 2020, Form 1099-NEC.  With the introduction of this new form, there are some changes to Form 1099-MISC.  Form 1099-NEC should be used to report nonemployee compensation and Form 1099-MISC should now be used to report other miscellaneous service payments.  

Form 1099-MISC

Form 1099-MISC must be filed for each person that you have paid the following during the year.

• At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest
• At least $600 in
  • Rents
  • Prizes and awards
  • Other income payments
  • Generally, the cash paid from a notional principal contract to an individual, partnership or estate
  • Any fishing boat proceeds
  • Medical and health care payments
  • Crop insurance proceeds
  • Payments to an attorney
  • Section 409A deferrals
  • Nonqualified deferred compensation
• For each person from whom you have withheld any federal income tax under the backup withholding rules regardless of the amount

There are some exceptions to 1099-MISC reporting.  The most common exception is payments made to a corporation (including limited liability corporations treated as a C or S corporation) generally do not need to be reported.  However, payments to attorneys that are corporations must be reported.  

Form 1099-NEC

Form 1099-NEC must be filed for each person that you have paid the following during the year.

• At least $600 in
  • Services performed by someone who is not your employee
  • Cash payments for fish you purchase from anyone engaged in the trade or business of catching fish
  • Payments to an attorney
• For each person from whom you have withheld any federal income tax under the backup withholding rules regardless of the amount

Similar to Form 1099-MISC, there are also exceptions for when a Form 1099-NEC is not required, most common are payments to a corporation (including a limited liability company that is treated as a C or S corporation) generally do not need to be reported.  However, payments to attorneys that are corporations must be reported.

Due Dates

Form 1099-MISC must be filed with the IRS by March 1, 2021, if you file on paper, or March 31, 2021, if you file electronically.  You must also provide a statement to the recipient by January 31, 2021.

Form 1099-NEC must be filed on or before February 1, 2021, using either paper or electronic filing procedures.  You must also provide a statement to the recipient by January 31, 2021.

To make sure your organization has the required information to complete any necessary 1099s, you should request that a Form W-9 be completed by each independent contractor before making any payments.  

Contributed by: Carrie Minnich, CPA, MAcct | Director | DWD CPAs & Advisors