Beginning with tax year 2020, all Nonemployee Compensation is to be reported on the new Form 1099-NEC. This type of compensation was previously reported in box 7 on the Form 1099-MISC.
If the following conditions are met, you must generally report a payment as nonemployee compensation:
- The payment was made to someone who is not your employee;
- The payment was made for services in the course of your trade or business (Including government agencies and nonprofit organizations);
- The payment was made to an individual, partnership, estate, or in some cases, a corporation; and
- The payments made to the payee were at least $600 in total during the year.
Payments to attorneys for any legal service/attorney fees of $600 or more paid in the course of your trade or business will be reported on Form 1099-NEC, even if the attorney is a Corporation. Gross proceeds paid to Attorneys will continue to be reported on Form 1099-MISC, box 10.
You must also file Form 1099-NEC for each person from whom you have withheld any federal income tax under the backup withholding rules regardless of the amount of the payment.
The IRS also made changes to the Form 1099-MISC to rearrange the box numbers for reporting certain income due to the creation of the new Form 1099-NEC.
Forms 1099-NEC must be filed with the IRS, either on paper or electronically, by January 31, however for the 2020 filings, the forms are due February 1, 2021. There are no automatic 30-day extensions to file Forms 1099-NEC. An extension to file may be available under certain hardship conditions.
Forms 1099-MISC must be filed on paper with the IRS by February 28, however for the 2020 filings, the forms are due March 1, 2021. If filing electronically, Forms 1099-MISC are due by March 31, 2021.
Recipient copies of both Forms 1099-NEC and 1099-MISC must be mailed by January 31 (February 1, 2021 for 2020 payments).
Contact your Legacy Professionals LLP representative with any questions.