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Businesses: Get Ready for the New Form 1099-NEC

There’s a new IRS form for business taxpayers that pay or receive non-employee compensation. Beginning with tax year 2020, payers must complete Form 1099-NEC, Non-Employee Compensation, to report any payment of $600 or more to a payee.

Why the new form? Prior to 2020, Form 1099-MISC was filed to report payments totaling at least $600 in a calendar year for services performed in a trade or business by someone who isn’t treated as an employee. These payments are referred to as non-employee compensation (NEC) and the payment amount was reported in box 7.

Form 1099-NEC was reintroduced to alleviate the confusion caused by separate deadlines for Form 1099-MISC that report NEC in box 7 and all other Form 1099-MISC for paper filers and electronic filers. The IRS announced in July 2019 that, for 2020 and thereafter, it will reintroduce the previously retired Form 1099-NEC, which was last used in the 1980's.

What businesses will file? Payers of non-employee compensation will now use Form 1099-NEC to report those payments. Generally, payers must file Form 1099-NEC by January 31. For 2020 tax returns, the due date will be February 1, 2021, because January 31, 2021, is on a Sunday. There’s no automatic 30-day extension to file Form 1099-NEC. However, an extension to file may be available under certain hardship conditions.

Can a business get an extension? Form 8809 is used to file for an extension for all types of Forms 1099, as well as for other forms. The IRS recently released a draft of Form 8809. The instructions note that there are no automatic extension requests for Form 1099-NEC. Instead, the IRS will grant only one 30-day extension, and only for certain reasons. Requests must be submitted on paper. Line 7 lists reasons for requesting an extension.

The reasons that an extension to file a Form 1099-NEC (and also a Form W-2, Wage and Tax Statement) will be granted are:

  • The filer suffered a catastrophic event in a federally declared disaster area that made the filer unable to resume operations or made necessary records unavailable.
  • A filer’s operation was affected by the death, serious illness or unavoidable absence of the individual responsible for filing information returns.
  • The operation of the filer was affected by fire, casualty or natural disaster.
  • The filer was “in the first year of establishment.”
  • The filer didn’t receive data on a payee statement such as Schedule K-1, Form 1042-S, or the statement of sick pay required under IRS regulations in time to prepare an accurate information return.

Need help? If you have questions about filing Form 1099-NEC or any tax forms, contact us. We can assist you in staying in compliance with all rules. © 2020