What is Form 1099-NEC and what is the deadline?

What’s the Purpose of the New Form?

The 1099-NEC is designed to replace Box 7 on the 1099-MISC. Legislation in 2015 caused the deadline for Box 7 information to change from March 31 to January 31, but the due date for non-Box 7 1099-MISC forms remained March 31. In essence, this change created two separate deadlines for the same form and much confusion.

Form 1099-NEC, Nonemployee Compensation, is a form that solely reports nonemployee compensation. Form 1099-NEC isn’t a replacement for Form 1099-MISC. Form 1099-NEC is only replacing the use of Form 1099-MISC for reporting independent contractor payments.

The 1099-NEC isn’t a new form. It was last used in 1982. However, the IRS revived the form in 2020. So, why is the IRS bringing back Form 1099-NEC?

Before the 2015 Protecting Americans from Tax Hikes Act (PATH Act), taxpayers could file one Form 1099-MISC to report nonemployee compensation and miscellaneous income items by February 28 each year. The PATH Act changed the Form 1099-MISC due date to January 31 for reporting nonemployee compensation.

Because of the due date change for nonemployee compensation, taxpayers had to begin separating nonemployee compensation using two Forms 1099. This change not only caused much confusion for business owners and taxpayers, but it also caused the IRS to treat forms received after the January 31 deadline as late returns.

The IRS has brought back Form 1099-NEC to separate nonemployee expenses and clear up the confusion.

Before 2020, nonemployee compensation was entered in Box 7 on Form 1099-MISC. In 2020, Box 7 on Form 1099-MISC turned into “Payer made direct sales of $5,000 or more of consumer products to a buyer (recipient) for resale,” and nonemployee compensation is reported on Form 1099-NEC instead.

What do you report on IRS Form 1099-NEC?

Again, use a 1099-NEC form to report nonemployee compensation. Nonemployee compensation includes the following payment types to independent contractors:

• Fees
• Attorney and legal fees
• Commissions
• Prizes
• Awards
• Other forms of compensation for services

Typically report a payment as nonemployee compensation if all of the following conditions apply:

• You made the payment to an individual who isn’t your employee
• The payment was for services during your trade or business
• You made the payment to an individual, a partnership, an estate, or a corporation
• Payments to the payee were at least $600 during the year
• If you pay an independent contractor nonemployee compensation, separate nonemployee 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 nonemployee compensation.

Where do you send Form 1099-NEC?

Like Form 1099-MISC, there are multiple copies of Form 1099-NEC you must distribute.

Check out each copy and its recipient below:

• Copy A: The IRS
• Copy 1: State tax department, if applicable
• Copy B: Independent contractor
• Copy 2: Independent contractor
• Copy C: Keep in your business records

You can file Form 1099-NEC electronically, or you can mail it to the IRS. Where you mail your completed form depends on your state. To e-file Form 1099-NEC, use Aatrix's eFiling service or the IRS’s FIRE system.

Important: The IRS has changed the Red form for the Federal copy of the 1099-NEC to a larger 3-up form, so be sure to use the correct form for your 1099-NEC filing.

What do you include on Form 1099-NEC?

As a reminder, newly hired independent contractors must fill out Form W-9. Then, you can use their Form W-9 to fill out Form 1099-NEC.

When filling out Form 1099-NEC, include the following information:

• Your name, address, and phone number
• Your TIN (Taxpayer Identification Number)
• Recipient’s name, address, and TIN
• Total nonemployee compensation
• Federal and state income tax withheld (if applicable)

For more information on how to fill out the form, check out the IRS’s website and 1099-NEC instructions.

When is the Form 1099-NEC deadline?

Employers have to keep the new 1099-NEC  due date on their calendars.

Send copies of Form 1099-NEC to workers you paid nonemployee compensation to during the year by January 31 or the next business day (if it falls on a weekend).

Also, file Copy A with the IRS by January 31 each year.

Need more help?

When do I use Form 1099-MISC and what is the deadline?

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