KPMG Spark Blog

Recommended

When is my individual 2020 tax return due?

What Is a 1099 and Why Should I Care?

KPMG Spark’s Guide To Important 2021 Tax Due Dates and Quarterly Filing Deadlines

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 the 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’s:

  • 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.  When you outsource your business’s managed accounting and taxes to KPMG Spark, we help with both points.  We’ll focus on tax return filing deadlines for 2020 to help all business owners.  We also will focus on the administrative tasks and ‘back office’ so you can get back to what you care about – your business and your family.

KPMG SPARK and SPARK related services are generally not permissible for audit clients and affiliates.

Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates or related entities.

The following information is not intended to be “written advice concerning one or more Federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

Timothy A A StilesPosted In: Tax Tips

Download our Free Guide - Managing Small Business Cash Flow

Recommended

When is my individual 2020 tax return due?

What Is a 1099 and Why Should I Care?

KPMG Spark’s Guide To Important 2021 Tax Due Dates and Quarterly Filing Deadlines

Subscribe

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

KPMG Spark is an online accounting service that saves you time so you can focus on what’s most important for your business.

Sign Up

7 Tips for Nonprofit Accounting

Find out more about nonprofit accounting, how it’s different from for-profit organizations, and what you need to know to operate your nonprofit successfully.

KPMG SparkJune 21, 2022Posted In: Tax Tips

Why Nonprofits Need Managed Accounting

Find out more about nonprofit organizations, why they need managed accounting, and how nonprofit bookkeeping can contribute to their success.

KPMG SparkJune 14, 2022Posted In: Accounting Info

6 Things You Need to Know About Nonprofit Accounting

Let’s take a closer look at what nonprofit accounting is, how it’s different, and why accountability is key for nonprofit success.

Timothy A A StilesJune 7, 2022Posted In: Accounting Info

Should Your Small Business Be Filing 1099-NEC Forms?

Let’s explore Form 1099-NEC – who is required to file it, who should be furnished it, and its importance in meeting your annual tax return requirements.

KPMG SparkMay 24, 2022Posted In: Tax Tips

Using a 1099-MISC Form for 2021 Taxes

Find out more about the 1099-MISC form including who submits it, who needs it, and how it relates to filing your 2021 taxes as a small business owner.

KPMG SparkMay 17, 2022Posted In: Tax Tips

Get To Know a KPMG Spark Bookkeeper, Austin!

Join us today to meet Austin, a bookkeeper at KPMG Spark. At KPMG Spark, our automated bookkeeping software is backed up by a team of real bookkeepers. They work behind the scenes handling all your day-to-day bookkeeping tasks. Clients can contact them with any questions they may have. Today we are getting to know Austin, one of our bookkeepers at KPMG Spark.

Alexandra OjalvoMay 10, 2022Posted In: Business Tips

Reduce Costs and Risks with Managed Accounting

How guidance from user-friendly software, state-of-the-art AI technology, and accounting specialists can be a gamechanger for small to medium business owners.

KPMG SparkMay 3, 2022Posted In: Business Tips

The Electronic Federal Tax Payment System or EFTPS®: Paying Your Taxes Online for Free

Find out more about the free EFTPS® service provided by the U.S. Department of Treasury, including how to use it and which updates may benefit you the most.

KPMG SparkApril 26, 2022Posted In: Tax Tips

Top Three Accounting Strategies You Can Implement to Position Your Business for Success

Check out these quick wins business leaders can begin practicing to experience noticeable accounting gains, from saving time to improving the bottom line.

KPMG SparkApril 14, 2022Posted In: Business Tips