The IRS has made some major changes to the 1099 Filing Form for 2020 affecting the way contract labor is reported. Contract labor is now required to be reported on the newly released Form 1099-NEC rather than Form 1099-MISC. The general rules in regards to the types of income to be reported are staying the same. The purpose of the change is to separate non employee compensation (hence, the acronym NEC) from other miscellaneous income types.
Again, the most significant change is the breakout of NEC from Box 7 of Form 1099-MISC to its own form. The NEC still includes payment of $600 of more for services of non employees and attorneys, however they will now be reported in Box 1 of the 1099-NEC. Note that payments of $600 or more for rent, prizes and awards, gross proceeds to attorneys, certain medical and health care payments and royalties over $10 should will still be reported on Form 1099-MISC. This form has been modified accordingly to eliminate the input of a dollar amount into Box 7 resulting in other box numbers being rearranged.
The filing deadline for both the recipient and the IRS for Form 1099-NEC is February 1, 2021, regardless of whether filing electronically or paper. The 1099-MISC is also due to recipients by February 1, 2021; however, the MISC form is not due to the IRS until March 1, 2021 for paper filing and March 31, 2021 for electronic filing.
To remain compliant, it is important for businesses to use the correct forms and filing within the specified time periods. Potts & Company’s experience and expertise offer your company the due diligence it deserves to shield you from penalties from filing incorrect and untimely forms. Penalties for non-compliance are now indexed and increase each year, costing you even more money. Call today to schedule a consultation, 479.648.2846.