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Form 1099-NEC: How Retro!

Here’s a blast from the past for those of us who were creating Forms 1099 in the early 1980’s. Form 1099-NEC is back! This form is not exactly the same as the last one used in 1982; the current form will be a primped up, more informative Form 1099 (read that as more boxes to fill out) to use for the 21st century (starting in 2020).

First, let’s explore a little bit of history

As stated earlier, this form was last used in 1982. The old Form 1099-NEC had one box to fill out to report fees, commissions and other non-employee compensation paid to certain entities who provided services and were compensated $600 or more in a calendar year. The other boxes on the form were for identifying the recipient (name and taxpayer ID number).

Learn more about form 1099-MISC

Beginning with the 1983 calendar year, the IRS moved the Form 1099-NEC information to the Form 1099-MISC. The filing due date of the Form 1099-MISC from 1983 to 2015 was February 28 (March 31, if filing electronically). Form 1099-MISC is used to report rent, royalties, other income, and non-employee compensation to name a few. Then, with the passing of the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), Congress changed the mailing due dates of the Form 1099-MISC to:

  • January 31 to all recipients
  • January 31 to the IRS (paper or electronic filing) if there is an amount in Box 7, non-employee compensation reported on the form
  • February 28 to the IRS, for paper filing, if there’s no Box 7 data to report
  • April 1 to the IRS, for electronic filing, if there’s no Box 7 data to report

Thus, the confusion. The same form has two different due dates. Yikes!

The IRS computers were unable to apply multiple due dates to a batch of Forms 1099-MISC submitted at the same time. For example, if a Form 1099-MISC batch was filed after January 31 and it had an entry in Box 7 for non-employee compensation, late payment penalties were assessed on every Form 1099-MISC submitted. The work-around to fix this issue was to file separate submissions of Forms 1099-MISC box 7 reporting.

IRS Resolution to this dilemma

To alleviate confusion caused by the PATH Act, the IRS reinstated Form 1099-NEC, with 2020 as the debut filing year. The updated Form 1099-NEC will replace Form 1099-MISC afore-mentioned box 7 and box 9 (direct sales of $5,000 or more of consumer products). There will also be boxes for federal backup withholding and for state information.

Keep in mind that both Forms 1099-NEC and 1099-MISC may need to be filed by the same entity for a calendar year but the issue of separate filing dates for the same form is now eliminated.

The 2020 Form 1099-NEC will have a likely due date of February 1 (since January 31, 2021, is a Sunday) to both recipient and the IRS for paper and electronic filing and the Form 1099-MISC will have a likely due date of February 1 (to the recipient) with an extension date of February 16 (if reporting payments in box 8 or 10). The IRS filing deadline of the new Form 1099-MISC will most likely be March 1 for paper filing and March 31 for electronic filing.

Itching to see these forms? Let your mouse do the walking

As always, please check with your Henry+Horne CPA for additional information and/or questions you may have.

 

Sahar T. Clancy, CPA