Starting with the 2020 tax yr, Kind 1099-NEC will substitute Kind 1099-MISC field 7 for reporting non-employee compensation, which incorporates funds to ICs.
Be Clear on When to Use Kind 1099-NEC
To place it merely, the brand new 1099-NEC performs the very same perform as 1099-MISC field 7. It captures funds of $600 or extra to service suppliers which are both sole proprietors or members of a partnership. Relying on the wants of your enterprise, you could have utilized any variety of impartial contractors, reminiscent of:
- Graphic designers
- Internet builders
- Cleansing professionals
- Freelance writers
- And different self-employed people
For these and different ICs, you could distribute the 1099-NEC to recipients by February 1, 2021 (since January 31 falls on a Sunday). That is additionally the date you could file these varieties with the IRS – whether or not you’re submitting by way of paper or electronically.
What About Kind 1099-MISC?
Since you’ll now not use a 1099-MISC to report impartial contractor funds, it’s possible you’ll marvel if this type serves any function. The 1099-MISC stays, however in a distinct capability. Typically talking, you must file a Kind 1099-MISC for anybody you paid no less than $10 in royalties or $600 in hire, prizes and awards within the earlier yr.
Tricks to Ease the Tax-Submitting Course of
That can assist you together with your upcoming submitting, take into account these do’s and don’ts:
- DO be sure you have a Kind W-9 on file for every contractor earlier than finishing Kind 1099-NEC.
- DO confirm that the taxpayer ID is right for every impartial contractor.
- DON’T use Kind 1099-NEC to report private funds.
- DON’T use Kind 1099-NEC to report worker wages (use the W-2 as a substitute).
Perception and Professional On-line Submitting
Need to be taught extra in regards to the variations between the brand new 1099-NEC and the 1099-MISC? Take a look at the small print right here. And once you’re able to file your 1099s this tax season, flip to efile4Biz for an efficient, reasonably priced resolution. It’s free to strive!
By Jaime Lizotte, Tax & HR Compliance Options Supervisor, ComplyRight