• Accounting
        • Your financial statements should show a complete picture of your business, and lay the foundation to help you create a strategy for the future.
          READ MORE>

        • Tax
        • Tax returns prepared to ensure we minimize your liability and keep more of your earnings over the long term.
          READ MORE>

        • Business Advisory
        • From proper entity selection at the inception of a business to developing an exit strategy, we are here to guide you in making informed decisions that are goal driven and take into consideration the materiality of your financial situation.
          READ MORE>

        • QuickBooks
        • We maximize your QuickBooks investment by customizing the software to meet your specific needs and industry best practices.
          READ MORE>

        • Litigation Support
        • We employ strong analytical and communication skills to produce evidence that supports your position in cases of a dispute or negotiation.
          READ MORE>

        • M&A Advisory
        • Whether you are selling, acquiring or expanding, we are well equipped to ensure you respond to opportunities swiftly and with confidence.
          READ MORE>

        • SJG
        • Manufacturing & Distribution
        • Success in manufacturing and distribution hinges on your ability to manage numerous details with accuracy and foresight into how they impact current and future operations.
          READ MORE>

        • Consulting Services
        • You focus on your core competencies, customer service and strategy and we’ll keep you from getting caught off-guard by daily financial tasks or overwhelmed by growth.
          READ MORE>

        • Medical
        • Patient care is your primary concern. Providing the best clinical experience for your patients continues to get more difficult and costly. Delivery models are changing from fee for service to quality based.
          READ MORE>

        • Legal
        • Running a legal firm is a balancing act with high stakes. Your reputation hinges on your ability to support clients with responsiveness and accuracy.
          READ MORE>

        • Real Estate
        • Real estate is characterized by large material gains and losses. Every transaction has the potential to impact your accounting and tax situation.
          READ MORE>

        • Technology
        • Perhaps more than any other industry, technology companies must have an infrastructure built to scale. A culture of continuous iteration requires an ability to account for a fluctuating profit margin.
          READ MORE>

        • Professional Services
        • With a consultative, integrated approach to accounting, tax and consulting services for businesses and individuals, we work hand in hand with you to achieve your goals.
          READ MORE>

        • SJG
  • CAREERS
  • CONTACT

SJG Blog

Form 1099-NEC (Non-Employee Compensation) Replaces 1099-MISC for Reporting Payments to Non-Employees

Businesses Beware: Despite COVID-19, the Internal Revenue Service is moving forward with changing the reporting requirements of Form 1099-MISC box 7, “Non-Employee Compensation” requiring reporting instead on Form 1099-NEC, effective for 2020.

Although Form 1099-NEC is straightforward, Box 1 is for reporting Non-Employee Compensation, many businesses will now be required to also file Form 1099-MISC to report amounts paid for other types of miscellaneous payments such as rents, royalties and legal fees.

While there are many types of information returns that businesses are required to file, the most common for our business clients in the past was Form 1099-MISC. In fact, according to a 2019 NPR/Marist poll, 20% of American workers were contract workers, a trend that continues to be on the rise.

We anticipate this change in reporting will add to the complexity of reporting requirements for businesses since they may now need to navigate through two different tax forms, with two sets of instructions and two different due dates.

Filing Requirements for Form 1099-NEC

Generally, you should file a 1099-NEC form for all vendors that are not incorporated and to whom you’ve paid $600 or more during the calendar year. Your list likely includes individuals, partnerships, LLCs, LLPs and some corporate entities, including contractors and non-employees.

While generally the 1099-NEC is due to be filed by January 31, to both the recipient and the IRS, for 2020 the due date is February 1, 2021, since January 31 falls on a Sunday.

Specific instructions for Form 1099-NEC can be found at www.IRS.gov/Form1099NEC

 Who NOT to issue Form1099-NEC

 Do NOT include amounts paid to vendors via credit card or debit card in the totals reported on 1099s. The credit and debit card companies will already be reporting this income to vendors.

Remember: This requirement applies only to businesses. If you make these or similar payments as an individual, not a business, you are not required to issue a 1099.

Filing Requirements for Form 1099-MISC

File Form 1099-MISC (Miscellaneous Income) for each person or entity to whom your business has made the following payments during the course of the year:

  • At least $10 in Royalties (see the instructions for box 2)

At least $600 in:

  • Rental Payments (box 1)
  • Prizes and awards (box 3)
  • Other income payments (box 3)
  • Fishing boat proceeds (box 5)
  • Medical and health care payments (box 6)
  • Payments to an attorney (box 10), regardless of whether the attorney/firm is incorporated or not incorporated
  • Direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment

Additionally, you must also file Form 1099-MISC for each person from whom you have withheld any federal income tax (report in box 4) under the backup withholding rules regardless of the amount of the payment.

Specific instructions for Form 1099-MISC can be found at www.IRS.gov/Form1099MISC

At SJG we can help you navigate thru the ever-changing tax landscape. See our last blog on Form W-9 best practices: https://www.sjgorowitz.com/irs-form-w-9-best-practices/

Share This:

Share on facebook
Facebook
Share on google
Google+
Share on twitter
Twitter
Share on linkedin
LinkedIn

Subscribe to Our Newsletter

Recent Posts

Scroll to Top