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The IRS has introduced a new Form 1099-NEC, which is the new way to report payments to others that are self-employment income. It replaces Form 1099-MISC. The forms now have different due dates and penalties for missing the filing deadlines.
Although the IRS Instructions for Form 1099-NEC say they are to start in 2022 for 2021 activities – THAT IS WRONG. 1099-NECs are due by the end of this month for 2020 payments made to independent contractors or for professional fees (February 1, 2021, because January 31 falls on Sunday).
Beginning with the 2020 tax year, the IRS now requires business taxpayers to report nonemployee compensation on the new Form 1099-NEC instead of on Form 1099-MISC. Similar required filing thresholds apply to the forms: if annual payments exceed $600, one or the other form must be filed for each payee. All the 1099 forms must be filed with the IRS and accompanied by a summing Form-1096.
Payments made in prior years as nonemployee compensation would typically appear in box 7 of 1099-MISC. Now those same payments will be placed on the new form (https://www.irs.gov/pub/irs-pdf/f1099nec.pdf). Because the form is in red and scanned by the IRS, you must use an approved form and not one printed from the Internet.
Conditions for nonemployee compensation to be reported on Form 1099-NEC include:
Nonemployee compensation can include:
Remember that as part of this change, Form-1099-MISC has also been modified. Box 7, which previously reported nonemployee compensation, now reports direct sales of $5,000 or more.