When Is Form 1099 Due?

Before 2020, if you made NEC payments, you provided a Form 1099-MISC to the contractor and the IRS to report the amount of the payments.  However, this year the IRS has introduced a new form solely for reporting non-employee compensation paid to independent contractors.

As a business owner, you may have employees.  However, you also may have needed some extra help for your business in 2020 and hired an independent contractor.  The payments you made to the independent contractor generally are known as “non-employee compensation” or “NEC”. 

Before 2020, if you made NEC payments, you provided a Form 1099-MISC to the contractor and the IRS to report the amount of the payments.  However, this year the IRS has introduced a new form solely for reporting non-employee compensation paid to independent contractors.  The new form is known (not surprisingly!) as Form 1099-NEC. You can find the new form here  Form 1099-NEC. 

Who needs to file Form 1099-NEC?

If you or your business meet the four following requirements, you will need to complete and file Form 1099-NEC for each recipient/payee:

• The payment was made to someone who is not your employee.
• The payment was made for services in the ordinary course of your trade or business (but note that nonprofit organizations are considered to be engaged in a trade or business).
• The payment of income was made to an individual, partnership, or estate (or a corporation that provided legal or medical services).
• The payments made to the recipient/payee aggregate at least $600 or more for the year.

What do I need to file the form?

Generally, you will need five pieces of information to complete Form 1099-NEC:

1.   Your business information (address, taxpayer ID number, etc.)

2.   The recipient’s information (legal name, taxpayer ID number, address)

3.   The total amount of NEC payments made to the recipient

4.   Federal and state income taxes you withheld (if any) on the payments made

5.   State information

We recommend that you request and obtain Form W-9 from any independent contractor to whom you made payments. This will include the recipient:

• Legal name or business name, if applicable
• Business entity classification (sole proprietor, C corporation, S corporation, partnership, etc.), if applicable
• Current address
• Taxpayer identification number (SSN, ITIN, or EIN)

Now what?

After you have gathered the necessary information, you will need to send the form to three different parties:

1.   The IRS

2.   The recipient/payee

3.   The state jurisdiction(s)

Depending on whether you file electronic or paper forms with the IRS, additional steps may be required.

What if I need help?

Taxes, bookkeeping, and accounting at times can be both complex and time-consuming.  They take more time when the books are messy and the numbers can’t be trusted. Work with Decimal to streamline the bookkeeping processes and restore confidence to your financials. When all the data is where it needs to be and is accurate, tax season is that much easier. Talk to Decimal to learn more about how we can help! 

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