1099-NEC or 1099-Misc ?

Recently, the IRS has released the 2020 form 1099-NEC. The new form replaces Form 1099-Misc for reporting nonemployee compensation(in box 7). 1099-Misc will report all other types of compensation. It is important for business owners to understand  what this change is and how it will impact your business year end reporting obligations.  Nonemployee Compensation - Any payment to nonemployee service providers, such as independent contractors, freelancer, vendors, consultants, and other self-employed individuals (commonly referred to as 1099 workers). Typical Examples of Nonemployee Compensation - Professional service fee to attorneys, accountants, and architects. - Fees paid by one professional to another. - Payment for services, including payment for parts or materials used to perform the services if they were incidental. - Commissions paid to nonemployee salespeople not repaid during the year.

Use the Form - 1099-NEC o To report attorney service fee etc. examples mentioned above. o Verify the recipient taxpayer ID is correct. You must have form W 9 from each recipient before you complete 1099-NEC. - 1099-Misc o To report gross proceeds to attorney o To report payment of rent to real estate agents or property manager o To report other miscellaneous income such as royalties, and medical and health care payment. o To report if you made royalty payments of at least $10 during the year

Filing Due Date - 1099-NEC: Distribute to recipients by January 31. And file with the IRS by January 31 through paper or electronic filing. - 1099-Misc: Distribute to recipients by January 31. And file with the IRS by February 28 if filing by paper, by March 31 if filing electronically.

It is important for business owners to request W9 when you work with a new vendor or contractor, so we can issue accurate 1099 forms at year end to report to the IRS.

I am here to help. If you have any questions, please contact me.