When Is Form 1099 Due?

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.