Form 1099-NEC - New changes by the IRS for 2021 - Explained
Updated on January 21, 2022 - 10:30 AM by Admin, TaxBandits
Form 1099-NEC is an IRS tax form that must be filed to report nonemployee compensation. Anytime you hire an independent contractor, vendor, or freelance worker, or a non-employee and pay them over $600 for their work, you are required to file a Form 1099-NEC with the IRS and must also furnish a recipient copy.
Form 1099-NEC is important to both you and your recipient as they might need it in order to complete their personal income tax return.
1. What’s New on Form 1099-NEC for the 2021 tax year?
There are a few changes to Form 1099-NEC for the 2021 tax year that filers should be aware of. The IRS classified Form 1099 as a continuous-use form. This means, the Form will be updated by the IRS as needed rather than annually.
The following are the changes made by the IRS to the 1099-NEC Form :
Changes on Box 1 of Form 1099-NEC
- Box 1 will not be used for reporting cash payments for the purchase of fish for resale purposes under section 6050R.
- Now, this has to be reported on Form 1099-MISC box 11
Changes on Box 2 of Form 1099-NEC
- Any sales of $5,000 or more of consumer products for resale, on buy-sell, deposit-commission, or any other basis, now can be reported on box 2 of Form 1099-NEC.
- This was previously reported on Form 1099-MISC. And, now filers can either report it on Form 1099-NEC box 2 or Form 1099-MISC box 7
FATCA Filing Requirements
Form 1099-NEC for 2020
Form 1099-NEC for 2021
- The IRS has removed the Check box for FATCA Filing Requirement from the 1099 NEC Form for the 2021 tax year which was available for the reporting on the previous tax year (2020).
Form Size Changes
- The size of Form 1099-NEC was resized. The IRS has reduced the height of the form so that it can accommodate 3 forms on a single page.
Changes in Electronic filing Requirements
- The Taxpayer First Act of 2019, enacted July 1, 2019, authorized the Department of the Treasury and the IRS to issue regulations that reduce the 250-return requirement for 2021 tax year to 100 returns, which is yet to be finalized by the IRS.
Note: In order to reduce the manual work involved in processing the returns and also to provide the filers with quick processing and instant approval, the IRS suggest filers to switch e-file their tax returns. Create a Free Account Today and E-file 1099 Forms in Minutes with the IRS.
2. How to fill out Form 1099-NEC?
Form 1099-NEC contains 15 different fields with two check boxes. It broadly classified into payer details, recipient details and compensation and tax information.
Completing Form 1099-NEC is quite easy with the guide that TaxBandits has come up with.
3. When is Form 1099-NEC Due?
The deadline to file Form 1099-NEC with the IRS is January 31, 2022. This is also the deadline to distribute recipient copies, these must all be complete and postmarked by January 31, 2022
Check your 1099 state filing requirements and deadline at https://www.taxbandits.com/state-filing-requirements/.
4. Advantages of Filing Form 1099-NEC Electronically with TaxBandits
There are many advantages in choosing to e-file your Forms 1099-NEC rather than filing paper copies.
The IRS suggest filers to file returns electronically for quick processing and to get an instant approval.
- There is no need for any software downloads or installs, licensing, and any subscriptions to use our software.
- As TaxBandits, is a cloud based e-file provider, you will be paying only for the returns which you file. Getting started is always free!
- When you e-file Forms 1099-NEC with TaxBandits there are many additional benefits, such as built-in error checks which will prevent your returns from errors. Our data validation includes TIN Matching, USPS Address Validation, and IRS Business Rules Validation.
- TaxBandits keeps up with the 1099-NEC changes so you don’t have to!
- We offer filing with both the federal and the state, online access and postal mailing solutions for delivering your recipient copies.
- We offer different options to import your data into our system such as bulk upload, quickbooks and Xero Integration, and API solution for service providers.
- And our pricing for 1099 starts from $2.75/form and goes as low as $0.80/form based on the volume of the returns that you file with us. View Pricing