If you file 1099 forms, you might have noticed a change this year. The IRS has changed 1099 2020 form requirements for those who need to file for contracted workers. Before 2020, businesses who hired independent contractors filed a 1099-MISC form to report those payments. This year, however, the IRS reintroduced the 1099-NEC form, simultaneously streamlining the process and complicating it for some filers.
This year likely marked a learning curve for many businesses who may need time to get used to this filing requirement change. To clarify the difference between the 1099-MISC and the reintroduced 1099-NEC, we’ve provided a brief guide to each form. We also wanted to highlight the differences to better improve your filing experience. And, remember, your filing process can always be improved with a software solution – especially if your business needs to manage multiple 1099 forms.
A Brief Guide to the 1099-MISC
Those who have hired contractors in the past are likely unfamiliar with the 1099 2020 form, as there are a few key changes to the 1099-MISC. The IRS 1099-MISC form is for business to report miscellaneous income. These payments include rented or leased space, medical payments, and others. You must file if these payments total $600 or more.
The form itself is similar to earlier versions of the 1099. The left side of the forms asks the payer for information like street address and TIN. Following this, the payer must input the recipient’s TIN, name, and address. The second half of the form contains boxes to report the appropriate amounts for the associated incomes.
To complete this form, you must know who you have paid and how much you have paid them for any applicable categories on the form. For more a step-by-step guide, you can view the IRS instruction page. Businesses must file this form with the IRS and distribute to contractors by January 31st.
A Brief Guide to the 1099-NEC
The 1099-NEC isn’t necessarily new, but it may be novel to you. The 1099-NEC form is for reporting non-employee compensation. The IRS separated this category of payments from the 1099-MISC form because of an unclear filing deadline in previous versions of the form. Businesses must file this form if they meet four conditions.
- Paid someone who is not your employee
- Made the payment from your business account (not a personal one)
- Paid an individual, corporation, estate, or partnership
- Paid more than $600 to payee
The form itself asks for the payer’s name, address, and TIN and the recipient’s name, address, TIN, and account number. The payer must then input the total amount of compensation. As with the 1099-MISC, businesses must file this form before January 31st.
The IRS reintroduced this form to keep non-employee compensations separate from other compensations that you would file with a 1099-MISC.
How AMS Filing Software Can Helps
If you have a 1099 2020 form to file or multiple 1099s, consider investing in the W-2/1099 software from Advanced Micro Solutions. Those handling 1099’s will likely need to handle several different types of the form. To ease your experience, our software is equipped with all the forms you might need for tax and wage filing. The software makes data entry very easy and accurate. Whether you are a small business learning the ropes of 1099 filing or someone looking for more accounting ease, consider trying a product from AMS.