Form 1099-NEC is used to report any nonemployee compensation.
Here’s what to know about the new 2020 Form 1099-NEC, who should use it, and adjustments to Form 1099-MISC.
What Is Form 1099-NEC?
The new Form 1099-NEC—which is actually an old form that hasn't been in use since 1982—is used to report any compensation given to nonemployees by a company. The IRS has separated the reporting of payments to nonemployees from Form 1099-MISC and redesigned it for tax year 2020.
Who Uses Form 1099-NEC?
All businesses must file a Form 1099-NEC form for nonemployee compensation if all four of these conditions are met:
- It is made to someone who is not your employee.
- It is made for services in the course of your trade or business.
- It was made to an individual, partnership, estate, or corporation.
- The payments made to the payee were at least $600 or more for the year.
Some examples of payments you must report on Form 1099-NEC include:
- Professional service fees to attorneys (including law firms established as corporations), accountants, architects, etc.
- Fees paid by one professional to another (fee-splitting, for example)
- Payments for services including payment for parts or materials used to perform the services if they were incidental to the service
- Commissions paid to nonemployee salespeople not repaid during the year
You must also file Form 1099-NEC for anyone from whom you withheld federal income tax under backup withholding rules for any amount, even if it’s less than $600.
Don’t use Form 1099-NEC to report personal payments. It’s only to be used for payments if you are in a trade or business for profit.
Where to Get a Form 1099-NEC
You can visit the IRS website to download an online copy of Form 1099-NEC. While it's possible to order paper copies of the form from the IRS, as of September 2020, the National Distribution Center is closed until further notice and cannot take order for forms or publications.
What to Do If You Don't Receive Form 1099-NEC
Form 1099-NEC must be filed with the IRS and given to nonemployees by January 31 after the reporting year. If you're a nonemployee and haven't received your form by then, contact the company directly to request it. You will need it for your personal tax return, so it's important to get it promptly.
How to Fill Out and Read Form 1099-NEC
There are five key parts to Form 1099-NEC:
- Payer's information
- Recipient's information
- Nonemployee compensation amount
- Federal income tax withheld
- State information
Both payer's and recipient's information includes their name, address, and taxpayer ID. Nonemployee compensation can be found in box 1 and should include the total compensation for the past tax year.
Box 4 is to report any federal income tax withheld, although it's uncommon that this will be the case unless you have received a backup withholding order for that person. If your state has an income tax, include the total payment amount to that person for the year and any state tax you withheld in box 5.
Can Form 1099-NEC be E-Filed?
Yes, Form 1099-NEC can be filed electronically with the IRS.
Where to Mail Form 1099-NEC
Where you mail your Form 1099-NEC depends on your state.
|Alabama, Arizona, Arkansas, Delaware, Florida, Georgia, Kentucky, Maine, Massachusetts, Mississippi, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Texas, Vermont, Virginia||Department of the Treasury Internal Revenue Service Center Austin, TX 73301|
|Alaska, Colorado, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, North Dakota, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Utah, Washington, Wisconsin, Wyoming||Department of the Treasury Internal Revenue Service Center P.O. Box 219256 Kansas City, MO 64121-9256|
|California, Connecticut, District of Columbia, Louisiana, Maryland, Pennsylvania, Rhode Island, West Virginia||Department of the Treasury Internal Revenue Service Center Ogden, UT 84201|
How to File Form 1099-NEC
The forms must be filed with the IRS before January 31 using either paper or electronic filing. If you file electronically, you’ll need to use the IRS FIRE system.
- Form 1099-NEC is used to report nonemployee compensation.
- Compensation only needs to be reported on Form 1099-NEC if it exceeds $600 for the previous tax year.
- Nonemployee compensation was previously included on the 1099-MISC form.