What to Know About Form 1099-NEC

What to Know About Form 1099-NEC

In light of the Internal Revenue System reviving the old form 1099-NEC to report all nonemployee compensation, we at KF Tax & Accounting, P.C., one of the leading tax accounting firms in Texas, has created the following explainer.

Quick note: Form 1099-NEC replaces 1099-MISC for reporting payments

Filing for nonemployee compensation isn’t that straightforward—you don’t necessarily have to report every payment you made to a nonemployee, only when the following conditions are satisfied:

  • If it was made to someone who is not your employee
  • If it was made to an individual, partnership, estate, or a corporation
  • If it was made for services within the duration of your trade or business
  • If the payment reached at least $600 or more for the year

Important: You must also include the federal income tax you withheld from a nonemployee of any amount (even if it did not reach $600) under the backup withholding rules.

Examples for payments that would usually meet these criteria are accounting and bookkeeping services fees for tax preparers, professional service fees for certified public accountants, attorneys, architects, designers, and the like, and fee-splitting payments or fees you made to another professional, etc. Refer to the complete list of reportable and non-reportable payments in this IRS-provided guide: www.irs.gov/pub/irs-pdf/i1099msc.pdf.

If you’re still not sure, you can ask a provider of tax services in Round Rock, Texas for assistance.

Whether you submit Form 1099-NEC via electronic filing or by paper, you must have them filled and accomplished before February 1, 2021 (instead of the customary January 31, 2021, as the latter falls on a Sunday), and filed to the IRS, so you can give the form to your nonemployees one year after reporting year or by February 1, 2021.

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