Everything you need to know about “The 1099-NEC tax form”
The new 1099-NEC tax form reports all forms of compensation for non-employees. You should know how it works, as well as the adjustments to the 1099-MISC form.
In the past, people used the 1099-MISC to report certain payments to the IRS. The start of the 2020 fiscal year, however, saw a redesign of Form 1099-MISC. Below is everything you need to know about the 1099-NEC tax form.
Remuneration history of non-employees
During the 1983 tax year, the Internal Revenue Service removed Form 1099-NEC. He started using Form 1099-MISC for filing non-employee compensation. This form has become a catch-all for various forms of miscellaneous income, such as proceeds from fishing vessels, royalties, rents, and non-employee payments. This reporting format existed for the next three decades.
In the 2017 tax year, the IRS revised the filing deadlines for tax forms with non-employee payments as of January 31. However, all other payments, if filed on paper, are still due by February 28. were due on March 31. These multiple filing deadlines created a lot of confusion and complexity for both registrants and software vendors. This is why the IRS has reworded the declassified Form 1099-NEC.
Presentation of Form 1099-NEC
This is actually an old form that people have been using since 1982. They use it to report all payments that non-employees receive from a business. The IRS, however, has separated the reporting of non-employee pay and redesigned the form for the 2020 tax year. Businesses will no longer have to report payments from non-employees on Form 1099-MISC. Examples of such payments include amounts paid to independent contractors.
To report a payment as compensation for non-employees, companies or employers must take certain conditions into account. These include:
- Whether they made payments to certain people or businesses amounting to at least $ 600 during the year.
- If they made payments to people who are not employees.
- Whether they made the payments to an estate, a partnership, an individual or, in some cases, a corporation.
- Whether they made payments for services received in the course of their business or trade.
Examples of compensation for non-employees
Different forms of payments fall under the category of non-employee compensation. These include payments for professional services such as accountants and lawyers and payments to independent contractors. They also include commissions paid to sellers subject to reimbursement but not reimbursed during the tax year. Employers must therefore provide tax form 1099-NEC to the beneficiary. They must also file with the IRS before February 1, 2021. Indeed, January 31, 2020 falls on a Sunday.
People Who Should Use Form 1099-NEC
All businesses must complete this tax form if they meet the conditions described above. They must also complete the form for individuals from whom they have withheld federal income tax for any amount under the withholding rules. However, you should not use the 1099-NEC tax form to report personal payments. You should only use it to report payments if you are in a business or for profit.
To get the 1099-NEC tax form, all you need to do is visit the Internal Revenue Service website and download it. People could also order hard copies from the IRS. The National Distribution Center, however, closed its doors in September 2020 until further notice. Therefore, at the moment, you need to download the online copy.