The Newest Internal Revenue Form

10/9/2020 - By Constance O'Donnell

“Oh, no…. not another IRS Form to complete!”

This will be the reaction of several people that need to complete the new Non-Employee Compensation Form (Form 1099-NEC) which was released by the Internal Revenue Service.

Form 1099-NEC

The IRS knows many small contractors and sole proprietors file their individual returns early in the season and having these forms will assist the IRS in picking up the income for these taxpayers with small businesses. The first Form 1099-NEC must be filed with the IRS by January 31, 2021. Thereafter, the returns will be due on January 31st of the year following the calendar year.

The Form is effective for payments beginning with tax year 2020. In addition to the information section for the name, address, and taxpayer identification number, the only other boxes are for gross income and any federal or state withholding taxes. Any Non-Employee Compensation payments to an individual, LLC, or partnership of $600 or more is to be reported on this form. The exception for payments to Corporations (C Corporations and S Corporations) continues.

Revised Form 1099-MISC

The Service has also redesigned the Form 1099-MISC and re-numbered the boxes. Taxpayers will continue to report other income in Box 3 on the Revised Form 1099-MISC. Taxpayers will also use Form 1099-MISC to report rents, payments to an attorney, prizes, etc. with a value of $600 or more. These Forms will be due on March 1, 2021, for paper filing or March 31, 2021, for electronic filings.

What to Expect

Taxpayers should begin evaluating their vendors to ensure they will be filed correctly in January. There will most likely be product upgrades from QuickBooks and other accounting program vendors on the changes to their programs, so be sure to download the latest version of your accounting software.

Saltmarsh is here to assist you. We can prepare your Forms to eliminate the stress and reduce the cost of purchasing two sets of forms. Contact your Saltmarsh representative or a member of our Tax and Accounting team to help you navigate these forms.

About the Author | Constance O’Donnell
Connie is a senior in the Tax & Accounting Services Department of Saltmarsh, Cleaveland & Gund. Prior to joining Saltmarsh in December 2014, Connie worked with a local CPA and consulting firm performing a variety of tax and accounting functions for business and personal clients, including preparation of corporate, non-profit and individual tax returns. She began her career in public accounting in 1993.