Prior to 2020, Form 1099-MISC was standard for non-employee compensation (NEC). This is no longer the case. Beginning with tax year 2020, employers should use Form 1099-NEC to report non-employee compensation. Here’s what you need to know to file correctly by the 1099 deadline this year.
The IRS released the new Form 1099-NEC (which actually isn’t new) to report any payments made to independent contractors (officially known as “non-employee compensation”) in 2020.
According to the IRS, if your business hired a contractor and paid them more than $600 in a year, you’ll need to file a Form 1099-NEC with the IRS and send a copy to the contractor.
More than likely, if you’ve filed a 1099-MISC form in past years for your business, you’ll be using the “new” and improved 1099-NEC form. But, there are still some important instances where you would want to file a 1099-MISC. If your business paid an individual or LLC at least $600 during the year in rent, legal settlements, prize or award winnings, you’ll likely file a 1099-MISC. Read all the details and specific reasons you’d choose to file Form 1099-MISC over a Form 1099-NEC here.
The due date for filing Form 1099-NEC, to both the IRS and to recipients, is February 1, 2021. The new 1099-MISC due date is March 1, 2021, if filing by paper, or March 31, 2021 for electronic filings.
For your business’s complex 1099 questions and filings, reach out to Paro directly. Our seasoned tax experts bring experience from thousands of past filings to ensure that yours are completed with the highest level of accuracy (and will be submitted on time, of course).