Why Did The IRS Make A New 1099 NEC Form?
May 14, 2020
Why Did The IRS Make The New 1099 NEC Form?
As you would expect this caused some confusion for many businesses.
The reason there was an issue with 1099-MISC Box 7 when the IRS/SSA changed the filing deadline for Box 7 revenue to January 31. This created a situation where there were actually two deadlines for the same form. As you would expect this caused some confusion for many businesses. Many were actually fined for late filings for missing the January 31 deadline.
The IRS decided to create a separate form to report the Box 7 revenue. The 1099-NEC form is now used to report non-employee compensation and the 1099-MISC will be used to report all other types of compensation.
What Happens With The 1099-MISC
The 1099-MISC will likely continue to be the most used 1099. Although independent contractors have increased over the past few years, it is only part of what was reported using the 1099-MISC form.
The 1099-MISC will continue to be the form used to report all other types of compensation which include:
- At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest.
- At least $600 in:
- Rents
- Services performed by someone who is not your employee
- Prizes and awards
- Other income payments
- Medical and health care payments
- Crop insurance proceeds
- Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish
- Generally, the cash paid from a notional principal contract to an individual, partnership, or estate
- Payments to an attorney
- Any fishing boat proceeds
In addition, use Form 1099-MISC to report that you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.
1099-NEC vs 1099-MISC
The 1099-NEC will simply replace the compensation you used to put in Box 7 and the 1099-MISC will continue to be used for all other forms of compensation.
The 1099-NEC will deadline on January 31 and the 1099-MISC will deadline March 31.
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