Review your books and records and confirm the total amount paid to each contractor during the tax year. Use this information to complete Form 1099-NEC. Some states participate in a program under which the IRS only transmits relevant forms if they have been filed electronically. Check with your CPA to see if you meet your state`s 1099 registration requirements. 1099-NEC is the form required to report independent contractor payments for the calendar year beginning in 2020. NEC stands for Nonemployee Compensation and Form 1099-NEC replaces what was previously listed in box 7 of Form 1099-MISC. Payments can be made in cash or in kind (e.g. trade). Or you can submit paper forms by mail.

If you file your return by mail, you must also complete and submit a Form 1096. Self-employed individuals should not see personal payments made to them during the year on the new form. Instead, your form should only show payments made as remuneration related to trade or business activities. 1099-NEC forms must be filed with the IRS by January 31, in paper or electronic form. Form 1099-NEC must be given to each beneficiary and filed with the IRS no later than January 31 of the year following the reported tax year. In other words, for example, Form 1099-NEC for 2022 must be filed by January 31, 2023. If January 31 is a weekend or holiday, the form must be completed the next business day. A Form NEC 1099 is just one of 18 different Form 1099s issued by the IRS to report income information. The amount is determined based on when you submit the correct information. If you can`t file your return on time, you can request an extension by filing Form 8809 with the IRS. However, you must send NEC 1099 forms to all contractors by January 31.

Note: While Form 1099-NEC will replace a 1099-MISC with data from box 7 as of calendar year 2020, Form 1099-MISC will continue to be used for other purposes, such as rent, payments to lawyers and fishing vessel products. For more information about Form 1099-NEC, visit the IRS website. Payments for services provided by independent contractors, for the purchase of fish from a person engaged in the fishing business or enterprise, or fees paid to a lawyer are listed in box 1 of Form 1099-NEC. If the paying business sold consumer products totalling $5,000 or more to the recipient for purchase/sale, deposit, resale or other, type an “X” in the check box in box 2. Box 3 shall be left blank; It is reserved for the use of subsequent taxation years. The federal income tax withheld during the year is shown in Box 4. Boxes 5 to 7 contain information for government income tax purposes. Generally, you do not need to issue NEC 1099 forms to C and S Corporations.

However, there are a few exceptions, including: These payments were previously reported on Form 1099-MISC until 2019, but must now be reported on Form 1099-NEC (example below). If you are the independent contractor who receives copy B, it is not your responsibility to file Form 1099-NEC. However, you should ask your client for a copy of the form for your records. All your income is listed in Appendix C. For each Form 1099-NEC, two copies are completed with the same information: copy A and copy B. In order to clarify the separate filing deadlines when reporting different payment methods on Form 1099-MISC, the IRS decided to reintroduce Form 1099-NEC, which includes a single filing deadline for all payments using the form. Recipient information, including name, address, and TIN. Form 1099-NEC is used by businesses to report payments they make to non-employees (such as independent contractors or sole proprietors) who provided a service during the taxation year. It is not used for employees of the company. If you received $600 or more from a beneficiary in the year as a non-employee, you must file Form 1099-NEC with the IRS as part of your tax return. If you had income from non-employees and did not receive your form by the end of January, contact the beneficiary directly to request it. Starting with the 2020 tax year, the IRS requires professional taxpayers to report non-employee compensation on the new Form 1099-NEC instead of Form 1099-MISC.

Businesses must use this form if they have made payments totalling $600 or more to a non-employee, such as an independent contractor. Just like 1099-MISC, there are several copies of the form that must be distributed. These copies are as follows: If your business paid more than $600 to a contractor in a taxation year, you must complete Form 1099-NEC. However, if the independent contractor is registered as a C corporation or an S corporation, a 1099-NEC is not required. This information can be found on the contractor`s Form W-9.