If you pay or receive nonemployee compensation, take note. There’s a new IRS form in town for business taxpayers. Beginning in the tax year 2020, payers will have to complete Form 1099-NEC, Nonemployee Compensation, to report any payment of $600 or more to a payee.

Why the new form?

Prior to 2020, business owners used Form 1099-MISC to report any payments totalling $600 or more during the calendar year for business-related services provided by anyone who wasn’t categorized as an employee. These payments are termed nonemployee compensation (NEC) and reported in box 7 on the form.

However, in July 2019, the IRS announced that Form 1099-NEC is being brought back as a way to remedy confusion caused by separate deadlines for: 

• Form 1099-MISC reporting NEC in box 7 
• All other Form 1099-MISC for paper filers and electronic filers 

Form 1099-NEC was last used in the 1980s.

What businesses file a Form 1099-NEC?

If you pay any nonemployee compensation of $600 or more, Form 1099-NEC is needed for reporting them to the IRS.

Filings for Form 1099-NEC are generally due by January 31. However, for 2020 tax returns, the due date will be February 1, 2021 as January 31, 2021, is on a Sunday. While there isn’t an automatic 30-day extension for filing Form 1099-NEC, an extension may be possible under some hardship conditions.  

Filing for an extension

If you believe you’ve experienced hardship conditions, you can use Form 8809 to file extensions for all Forms 1099. This form can be used for other extensions as well. 

The IRS recently issued a draft of Form 8809, with instructions noting that automatic extension requests for Form 1099-NEC aren’t granted. Instead, only one 30-day extension can be granted for the following reasons:

• The filer suffered a catastrophic event in a federally declared disaster area that made the filer unable to resume operations or made necessary records unavailable.
• A filer’s operation was affected by the death, serious illness or unavoidable absence of the individual responsible for filing information returns.
• The operation of the filer was affected by fire, casualty or natural disaster.
• The filer was “in the first year of establishment.”
• The filer didn’t receive data on a payee statement such as Schedule K-1, Form 1042-S, or the statement of sick pay required under IRS regulations in time to prepare an accurate information return.

Requests should be submitted by paper form with reasons for the extension listed on Line 7.  

Get help on your taxes

Tax filing changes can be challenging to track. If you have questions about how to file Form 1099-NEC - or any other tax forms - reach out to us for assistance. We can help you navigate the rules and regulations so you stay compliant with your tax obligations.