Form 1099-NEC is used to report any nonemployee compensation.
Here’s what to know about the new 2020 Form 1099-NEC, who should use it, and adjustments to Form 1099-MISC.
What Is Form 1099-NEC?
The new Form 1099-NEC—which is actually an old form that hasn't been in use since 1982—is used to report any compensation given to nonemployees by a company. The IRS has separated the reporting of payments to nonemployees from Form 1099-MISC and redesigned it for tax year 2020, meaning that in January 2021, organizations will file this new form.
The 1099-NEC is simple: Box 1 is for non-employee compensation and Box 4 is for federal withholding for that contract employee. To put it simply, income that the company used to report in 1099-MISC Box 7 will now be reported in 1099-NEC Box 1.
State tax withheld, payer state ID number and state income is reported in Boxes 5, 6 and 7 on the 1099-NEC.
That's it. Those are the only boxes on the new 1099-NEC.
Who Gets Form 1099-NEC
According to the IRS, the people for whom an organization should provide the new 1099-NEC are those with at least $600 in:
Services performed by someone who is not an employee (including parts and materials (Box1);
Cash payments for fish (or other aquatic life) that the company purchases from anyone engaged in the trade or business of catching fish (Box 1 on the 1099-NEC);
Payments to an attorney (Box 1). The term "attorney" includes a law firm or other provider of legal services. Attorneys' fees of $600 or more paid in the course of the organization’s trade or business are reportable in Box 1 of Form 1099-NEC, under Section 6041A(a)(1); or,
Each person from whom the company has withheld any federal income tax (report in Box 4 of form 1099-NEC) under the backup withholding rules, regardless of the amount of the payment.
Some examples of payments you must report on Form 1099-NEC include:
Professional service fees to attorneys (including law firms established as corporations), accountants, architects, etc.
Fees paid by one professional to another (fee-splitting, for example)
Payments for services including payment for parts or materials used to perform the services if they were incidental to the service
Commissions paid to nonemployee salespeople not repaid during the year
You must also file Form 1099-NEC for anyone from whom you withheld federal income tax under backup withholding rules for any amount, even if it’s less than $600.
How To Fill Out Form 1099-NEC
There are five key parts to Form 1099-NEC:
Payer's information
Recipient's information
Nonemployee compensation amount
Federal income tax withheld
State information
Both payer's and recipient's information includes their name, address, and taxpayer ID. Nonemployee compensation can be found in box 1 and should include the total compensation for the past tax year.
Box 4 is to report any federal income tax withheld, although it's uncommon that this will be the case unless you have received a backup withholding order for that person. If your state has an income tax, include the total payment amount to that person for the year and any state tax you withheld in box 5.
Companies using PayNortheast's online payroll service will have form 1099-NEC completed and filed automatically at no cost.When Is Form 1099-NEC Due
The due date for the 1099-NEC form is Feb. 1, 2021, to both the IRS and to recipients. The new 1099-MISC due date is pushed back to March 31, 2021, for IRS e-filing, since it no longer contains Box 7. It is still due to recipients on Feb. 1, 2021.
Can Form 1099-NEC Be E-filed
Yes, form 1099-NEC can be filed electronically with the IRS. If you are using PayNortheast's payroll service, your 1099-NEC form will be filed for you.
Where To Mail Form 1099-NEC
If you are using PayNortheast's payroll service, they will file your 1099-NEC form(s) for you. Otherwise, where you mail your 1099-NEC form depends on your state.
If you are in:
Alabama, Arizona, Arkansas, Delaware, Florida, Georgia, Kentucky, Maine, Massachusetts, Mississippi, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Texas, Vermont, Virginia
Mail your 1099-NEC to:
Department of the Treasury Internal Revenue Service Center Austin, TX 73301
If you are in:
Alaska, Colorado, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, North Dakota, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Utah, Washington, Wisconsin, Wyoming
Mail your 1099-NEC to:
Department of the Treasury Internal Revenue Service Center P.O. Box 219256 Kansas City, MO 64121-9256
If you are in:
California, Connecticut, District of Columbia, Louisiana, Maryland, Pennsylvania, Rhode Island, West Virginia
Mail your 1099-NEC to:
Department of the Treasury Internal Revenue Service Center Ogden, UT 84201
The New 1099-MISC
All of the other income typically reported on a 1099-MISC will stay on that form, though Boxes 7 through 17 on the 1099-MISC have been shuffled. Box 1, “Rents,” and Box 3, “Other Income,” remain the same.
More information on the 1099-MISC and the 1099-NEC are on the IRS web site: www.irs.gov/instructions/i1099msc.
1099-NEC Review
Form 1099-NEC is used to report nonemployee compensation.
Compensation only needs to be reported on Form 1099-NEC if it exceeds $600 for the previous tax year.
Nonemployee compensation was previously included on the 1099-MISC form.