WARNING: Things you Need To Know About the NEW 1099-NEC form
Before 2020, you used to use form 1099-MISC (Box 7) for each person to whom you have paid during the year for the following:
At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest.
At least $600 in:
- Prizes and awards.
- Other income payments.
- Medical and healthcare payments.
- Crop insurance proceeds.
- Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish.
- Generally, the cash paid from a notional principal contract to an individual, partnership, or estate.
- Payments to an attorney.
- Any fishing boat proceeds.
Now, you will need to use the new Form 1099-NEC to report any nonemployee compensation you paid during the year to report the following:
At least $600 in:
Services performed by someone who is not your employee (including parts and materials) (box 1);
Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish (box 1); or
Payments to an attorney (box 1). (See Payments to attorneys, later.)
You must also file Form 1099-NEC for each person from whom you have withheld any federal income tax (report in box 4) under the backup withholding rules regardless of the amount of the payment.
Who must complete the 1099-NEC form?
You only need to report on Form 1099-NEC payments that are made in the course of your trade or business. Personal payments are not reportable. You are engaged in a trade or business if you operate for gain or profit. However, nonprofit organizations are considered to be engaged in a trade or business and are subject to these reporting requirements.
What are the exceptions?
Some payments do not have to be reported on Form 1099-NEC, although they may be taxable to the recipient. Payments for which a Form 1099-NEC is not required include all of the following:
Generally, payments to a corporation (including a limited liability company (LLC) that is treated as a C or S corporation). However, see Reportable payments to corporations, later.
Payments for merchandise, telegrams, telephone, freight, storage, and similar items.
Payments of rent to real estate agents or property managers. However, the real estate agent or property manager must use Form 1099-MISC to report the rent paid over to the property owner. See Regulations sections
Do not use Form 1099-NEC to report:
Employee business expense reimbursements.
When to file?
File Form 1099-NEC on or before February 1, 2021, using either paper or electronic filing procedures.
File Form 1099-MISC by March 1, 2021, if you file on paper, or March 31, 2021, if you file electronically.
If you want us to complete the 1099-NEC forms on behalf of your company please don’t hesitate to contact us.