Just in case you weren’t overwhelmed with 2020 already, the IRS has added a new form for reporting non-employee compensation starting in January 2021.  Most employers are already familiar with the 1099-Misc form used to report compensation paid to non-employees.  Now most payments that were previously reported on that form will be reported on a 1099-NEC.  This form isn’t new; it was last seen during the Reagan administration.  Now to the question on everyone’s mind, what do you need to know about the new reporting requirements?

 

• The new form will be required to be issued by February 1st.  Conversely, the 1099-Misc will have a new due date of March 31st.
• Amounts that were previously reported in box 7 of the 1099-Misc will now be reported on the 1099-NEC.  These amounts are for non-employee compensation that does not fall into one of the following categories: rent, royalties, prizes, fishing boat proceeds, medical payments, and crop insurance proceeds.
• Any non-employee that doesn’t fall into one of the above categories and receives $600 or more in compensation will need to be issued a 1099-NEC.  Additionally, any federal tax withholding that was withheld will also need to be reported on that form.
• Attorney fees, which had previously been reported separately from other non-employee compensation, will also be reported on the new form.

If you have questions or will need help navigating this new reporting requirement, please feel free to contact us.