IRS Form 1099-MISC
vs Form 1099-NEC
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IRS Form 1099 MISC vs NEC - Explained
Updated on December 11, 2020 - 10:30 AM by Admin, TaxBandits
Non-employee compensation doesn’t have to be reported in Form 1099-MISC any longer. Filers can now use Form 1099-NEC to report non-employee compensations to the IRS. This return has to be filed for each non-employee, if the business has paid them $600 or more in a tax year.
In this article, we cover the following topics:
1. What is Form 1099-MISC?
Form 1099-MISC is a variant of Form 1099, used specifically to report miscellaneous income. This return is filed by organizations for each independent contractor, freelancer, or non-employee. This form reports the miscellaneous payments made to this person in a tax year.
2. What is the purpose of the new Form 1099 NEC?
The IRS has introduced Form 1099-NEC for tax year 2020. The arrival of this form means that the non-employee compensation doesn’t have to be reported using Form 1099-MISC anymore.
Form 1099-NEC is a tax return used by businesses to report non-employee compensation payments made during the tax year to the IRS. Any payments made to an independent contractor, freelancer, or non-employee are considered as non-employee compensation.
3. Why did the IRS create Form 1099-NEC?
The deadline to file Form 1099-MISC to report non-employee compensation and miscellaneous income was on February 28. The Protecting Americans from Task Hikes (PATH) act changed the deadline to file Form 1099-MISC for reporting non-employee compensation to January 31.
To clear up the deadline confusion and to separate non-employee expenses, the IRS introduced 1099-NEC.
4. What’s the difference between Form 1099-MISC vs NEC?
The non-employee compensation is usually reported on Form 1099-MISC Box 7. The arrival of Form 1099-NEC means that this information no longer has to be reported in Form 1099-MISC. Businesses can now use Form 1099-NEC to report non-employee compensation exclusively.
The IRS has now made two forms available, Form 1099-NEC, to report non-employee compensation, and Form 1099-MISC, to report other miscellaneous income.
Form 1099-MISC should be filed by business to report the following information:
- Fishing boat proceedings.
- Medical and Healthcare payment.
- Payments made instead of dividends or interest.
- Payments made to an attorney.
- Crop insurance proceedings.
- Cash paid from a notional principal contract to an individual, partnership, or estate.
Form 1099-NEC should be filed by businesses to report the following information:
- Any other form of compensation.
You must file both these returns only if you made a payment of $600 or more. However, you must file Form 1099-MISC if you made a payment of at least $10 royalties or payments instead of dividends or interest.
TaxBandits is the #1 IRS authorized e-file provider on the market, helping you file your tax returns easily. We support both 1099-MISC and 1099-NEC. Start e-filing both these returns with TaxBandits now.