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The IRS has released form 1099-NEC (Non-Employee Compensation) for reporting money a business pays to independent contractors. This new form will replace box 7 on the 1099-MISC form. Most businesses will have to file two separate forms, as employers will still need to use the 1099-MISC form for reporting rent, royalties, healthcare payments, awards, and other income. If you are currently using box 7 on the 1099-MISC form, you will have to move that info to box 1 on the 1099-NEC to report nonemployee compensation for 2020.
Payments of $600 or more to a service provider will be captured by the new form. Employers must use the form for work done by an independent contractor, including vendors, consultants, freelancers, landscapers, and other self-employed individuals.
The IRS defines a reportable payment as a combination of these four conditions:
- It is made to someone who is not your employee.
- It is made for services in the course of your trade or business.
- It was made to an individual, partnership, estate, or, in some cases, a corporation.
- Payments were $600 or more for the calendar year.
Instructions for using both Forms 1099-NEC and 1099-MISC to report non-employee compensation for 2020 can be found on the IRS website.
GTM keeps our clients compliant with changes to payroll and tax regulations, ensuring accuracy and easing the burden on businesses. Plus we provide automated multi-state, multi-location tax filing, with all data fully integrated into our payroll platform. Request a free quote to learn more.
