Form 1099-NEC Replaces Form 1099-Misc Box 7: As a 1099 filer, you must know updated about 1099 tax forms. Internal Revenue Service provides various forms for reporting various types of payments. People who use 1099 forms must have an idea about the new form.
Recently, IRS reintroduces the 1099-NEC Form for reporting non-employee compensation for the 2020 tax year. Payers who paid non-employees must use 1099-NEC Form instead of 1099-Misc Box 7 for reporting non-employee payments.
Use 1099-NEC Instead of Box 7 of 1099-Misc
Box 1 of the 1099-NEC Form will be used instead of Box 7 on the 1099-Misc for the 2020 tax year. Here, we provide details about 1099-NEC and what is the reason behind replacing 1099-NEC instead of 1099-Misc Box7.
Who Report 1099-NEC Form to the IRS?
1099-NEC Form is an IRS tax form and it is used for reporting non-employee payments like contractors, vendors. People like business owners who appointed non-employees and paid more than $600 for services must issue a 1099-NEC Form to the IRS.
For instance, if you recruited an independent contractor for your business growth and paid $850, then you must issue a 1099-NEC Form. You must provide your 1099-NEC Form before the due date with the Internal Revenue Service.
What is the Reason behind Replacing 1099-Misc?
IRS uses the new 1099-NEC Form instead of 1099-Misc Box 7 for reporting non-employee payments. The main reason for changing 1099-MIsc is Form 1099-Misc having different deadlines for reporting various payments. People who report Form 1099-Misc is always confuse about filing deadlines. For reporting NEC payments and other miscellaneous income payments, payers use 1099-Misc prior 2020 tax year. To avoiding due dates confusion, Internal Revenue Service introduces the 1099-NEC Form. Because of the due date change for non-employee compensation, taxpayers had to begin separating non-employee payments using two 1099 Forms. This change not only caused a lot of confusion for payers but also caused the IRS to mistakenly treat forms obtained after the January 31 deadline as late returns. 1099-NEC is replacing the use of Printable 1099-MISC Form for reporting independent contractor payments.
Payments Report on Form 1099-NEC
Non-employee compensation includes the following payment types to contractors:
• Fees • Commissions • Prizes • Awards • Other forms of payments for services
If you pay contractor payments, separate non-employee compensation payments from all of your other Form 1099-MISC payments.Fill out Form 1099-NEC if you have any workers you paid $600 or more to in non-employee compensation for the 2020 tax year.
What Do You Enter On 1099-NEC Form?
Newly hired contractors must fill out the W-9 Form. Then, use the W-9 Form to report non-employee payments at the end of the year.
Must include the following information for reporting 1099-NEC
• Business’s name, address, and phone number • Business’s Tax Identification Number • Recipient’s name, address, and Tax Identification Number • Nonemployee compensation • Federal and state income tax withheld
Due Date for Form 1099-NEC
The payer must send copies of Form 1099-NEC to workers you paid non-employee compensation to during the year by February 1. Also, file Copy A of Form 1099-NEC with the Internal Revenue Service by February 1 each year.