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Are You Ready? 1099-NEC

You are here: Home / Uncategorized / Are You Ready? 1099-NEC

November 6, 2020 //  by Kyle//  1 Comment

Starting for tax years 2020 the Internal Revenue Service is requiring anything that would have traditionally been reported on the 1099-MISC Box 7 “Non-Employee Compensation” to be reported on the brand new for 1099-NEC.

Due Date: February 1st to both the IRS and the recipient

The threshold for Non-employee compensation basically stayed the same at $600. The following are some examples of transactions that would require and 1099-NEC.

  • Independent Contractors – You must report cash payments for services performed by someone who is not an employee (including parts and materials)
  • Fee Splitting – Fees paid by one professional to another, such as fee-splitting or referral fees
  • Directors’ Fees – You must report directors’ fees and other remuneration, including payments made after retirement
  • Exchanges of services: You must report exchanges of services between individuals in the course of their trades or businesses (ie bartering transactions)

IMPORTANT NOTES:

Payments made with a credit card or payment card and certain types of payments, including third-party network transactions, are not subject to reporting on Form 1099-NEC

Do not use Form 1099-NEC to report employee business expense reimbursements. Report payments made to employees under a nonaccountable plan as wages on Form W-2. Generally, payments made to employees under an accountable plan are not reportable on Form W-2.

Individual state filing requirements are as yet unknown. We anticipate new state 1099-NEC requirements arriving late in the year, making for a hectic January.

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Comments

  1. Charlie Schmidt

    January 5, 2021 at 8:59 pm

    Thanks for all of the information, especially the helpful tips at the end. I’m still new to Form 1099-NEC, so I wasn’t aware that payments made with a credit card are excempt from reports. I recently discovered the website https://www.1099-etc.com and intend to read up more about these forms in the new year!

    Reply

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