After years of teasing its release, the IRS has finally revived a much-needed form: the 2020 1099-NEC Form, or the Nonemployee Compensation form. Interestingly, it is not a brand-new form. The 1099-NEC was common in the mid-20th century, but it hasn’t been used since 1982. Familiarizing yourself with how to file a 1099-NEC makes sense given the:
- Increasing number of contracted and gig workers
- Folks who receive non-employment compensation from a variety of entities
These factors have driven the IRS to bring back the Form 1099-NEC in all its glory. If you’ve struggled with non-employment compensation in the past, this tax filing season may be a bit simpler. If you are new to 1099 filing and 1099-compensation, we will run through what you should expect from the 2020 Form 1099-NEC.
Importantly, if you’re looking for 1099-NEC support, you’re probably in need of a filing solution. The tools available from Advanced Micro Solutions are a great fit for most businesses. Plus, the modular set-up ensures users spend money only on the tools and functions they want, resulting in an accessibly priced software solution.
Understanding Non-Employee Compensation
We’ve written a bit about nonemployee compensation before, but it’s important to understand this type of income. Non-employee compensation is a payment your business makes to people who aren’t employees. The IRS specifies this as someone who:
- Is not your employee
- Has performed services for your trade or business
- Is an individual, partnership, or estate
- Has earned over $600 for the year
This income was previously reported in Box 7 on the 1099-MISC, but it had a separate filing deadline from the other types of miscellaneous compensation. The threshold for distributing a 1099-NEC remains the same as when this type of income was on the 1099-MISC: $600 or more warrants a filing.
2020 Form 1099-NEC Deadlines
Deadlines were the biggest confusion regarding non-employment compensation when it was on the 1099-MISC. Take note that the 2020 1099-NEC form must be provided to recipients by January 31, 2021. Because January 31 will be a Sunday, this deadline is technically extended to February 1, 2021. Businesses must file these forms with the IRS by February 1, 2021 as well.
Keep in mind that you may still need to fill our a 1099-MISC form for 2020 in addition to a 2020 1099-NEC form. The only difference this year is that nonemployee compensation has its own box. If your business has paid our prizes, awards, certain healthcare and medical payments, attorney fees, and/or royalties, you’ll still need to complete a 2020 1099-MISC form.
Get Ahead on Your 2020 Filings with AMS
Keeping track of non-employee data is the best way to prepare for your 2020 Form 1099-NEC filing. Advanced Micro Solutions has an excellent 1099/W-2 forms filer to help you prepare filings, but you might also be interested in AMS Payroll . This software allows users to designate between employees and non-employees (W-2 workers and 1099 workers) when distributing pay stubs and calculating taxes. By storing this information within a single software solution, you can more readily access data when it comes time to file the 2020 1099-NEC and 1099-MISC. Get ahead this year with tools from Advanced Micro Solutions.