Report 1099 NEC Form Payments: One of the most important updates for the taxpayers in 2020 came with the reintroduction of 1099 NEC. IRS retired this Form way back in 1982, but this was revived this year to replace the use of 1099 MISC box 7.
Regardless if you’re a taxpayer, take some time to go through all these updates and changes. We’ll provide you information about payments reported through Form 1099 NEC in 2020. 1099 NEC important for every business that hires an independent contractor, freelancers, and self-employed.
What do you report through 1099 NEC Form?
A business owner required to file a 1099 NEC if they:
Pay at least $600 for services performed by a non-employee, attorney fees for legal services.
Payments made for services including payments for parts or materials used to perform the services.
Payments made by attorneys to witnesses or experts in legal adjudication.
Fees paid by one professional to another such as fee-splitting, referral fees etc.
Professional service fees such as fees to attorneys, accountants, architects etc.
The renewed Form used for reporting non-employee compensation, which replaces 1099 MISC box 7. The major use of the Form, to clear the confusion created by 1099 MISC Form. As per the IRS 2020 guidelines, using revamped IRS 1099 NEC to report non-employee compensations made during the 2020 tax year.
Who needs to use IRS Form 1099 NEC?
1099 NEC used by the business individuals for reporting payments they made for work done by anyone who’s not their employee. The term non-employee compensation stands for every independent contractor, freelancer, any other self-employed individual who performed any kind of service for the taxpayer.
- Any payment to someone who’s not on your workforce, not your employee, and not on your payroll needs to appear on this form.
- Payments made for services in course of trade or business.
- Use Form for commissions made to non-employee salespeople.
- This Form can be issued not only to individuals but also to partnerships, estates, or corporations.
- Additionally, clients need to fill out Form for any service provider for whom they withheld federal income tax under backup withholding rules.
Are there any exceptions for 1099 NEC Tax Form?
There are a few misconceptions and errors when filing 1099 NEC. Following are the exceptions for the Form:
Payments to corporations
First of all, make sure that your independent contractor not registered as C corporation or an S corporation. If you’re an independent contractor registered as a corporation, then you’re not required to fill out Form.
You should never file 1099 NEC for employees. The mistake of classifying your employee as an independent contractor a common one. IRS doesn’t take these cases lightly, so make sure you aren’t misclassifying anyone who works for you.
Another important rule about filing personal payments under this Form. don’t report payments made for personal use through IRS 1099 NEC.
Filing attorney fees and gross proceeds through Federal 1099 NEC is the common mistake since they are someone who provide you with a service.
How to fill the Federal 1099 NEC Form?
Service providers are required to provide their clients with a W-9 Form which includes name, address, and most importantly their TIN. All of that data necessary to fill out the tax forms.
Every Form 1099 NEC filled by the taxpayer for the previous year, at the beginning of the following one. Once the filer has the W-9 Form they can fill out Form 1099 NEC Online, which needs to have two copies- Copy A and Copy B.
The taxpayer requires to file Copy A to the IRS while providing their independent contractor with Copy B. It’s not the responsibility of the payee to file this form, but of the payer. However, the service provider needs to have a copy, in order to file that income on their own tax records
Key dates to file 1099 NEC Form
Beginning with the 2020 tax year, copies of your 1099 NEC Forms must generally be distributed and postmarked to independent contractors and to the IRS.
Taxpayers need to issue the following 1099 NEC copies:
- Issue copy A to the IRS by February 1st, 2021. The due date is same for paper filing and e-filing.
- Furnish copy B to the independent contractor by February 1st, 2021.
- Taxpayers preserve the copy C of the Form for future transactions.
Note: The deadline to file 1099 NEC Form with the recipient and to the IRS remains same.
1099 NEC Form penalties and fines
If you miss the filing deadline, you’re required to pay a fine. The penalties for late filing or missing to file 1099 NEC Form are as follows:
$50 per 1099 NEC when filed after the due date within 30 days of the deadline.
If you file after 30 days of the deadline, then pay $110 per 1099 Form.
$280 per 1099 Form when filed after august 1st.
If you missed to file 1099 NEC within the deadline, $550 per form paid as fine. The penalty amount increases with the day of filing the Form.
Are you looking forward to file your payments made to a non-employee? We’ll provide you service to file 1099 NEC Form online with File 1099 MISC. We’ll guide you in filing your 1099 information returns to the IRS and to the recipient’s error freely. We’ll submit you’re 1099 forms to the IRS on time.