In mid-2019, the IRS debuted a new version of the 1099 NEC form. The new 1099 NEC is designed to eventually replace Box 7 on the 1099-MISC, which asks for reporting nonemployee compensation, and Box 9, which is used to report direct sales of $5,000 or more. The IRS’s goal in doing this is to alleviate confusion caused by the 2015 PATH Act, which changed the due date for Box 7 from March 31 to January 31. Put simply, a single form had two separate due dates. Most filers were confused. The 1099 NEC meant to help payers avoid late reporting penalties and fees associated with these varied deadlines.
Interestingly, the 1099 NEC is not new at all. The Nonemployee Compensation form was a standard document among filers until 1982, when the form was replaced by form 1099-MISC. The new version of the form looks similar to the old, but there are a few notable differences.
While the new 1099 NEC form is designed to alleviate some confusion, encountering a new form is always a puzzling experience – even if you’ve technically filed a 1099 NEC in the past. We’ve broken down this tentative new form to provide the information you need to have a smooth filing process.
Information You’ll Need
The 1099 NEC, or Nonemployee Compensation form, replaces Box 7 altogether as the new form of reporting this type of compensation. The iteration of the 1099 NEC you may be familiar with requires the payer’s personal information and identifying number. This form also needed to report the recipient’s identifying number and personal information, and any fees, commissions, and other compensation.
The new version of the form requires nearly identical information but in a more streamlined layout. There are also separate boxes for state tax withheld, state information, and state income tax. The form is easily filed alongside other types of 1099s. Nonemployee compensation on its own is a complicated thing, and the IRS has designed this new form to make the process a bit simpler.
What to Expect
The 1099 NEC has not yet been officially incorporated in U.S. tax law. In the most recent version of the form, the IRS warns, “This is an early release draft of an IRS tax form, instructions, or publication, which the IRS is providing for your information. Do now file draft forms and do not rely on draft forms, instructions, and publications for filing.” Until the IRS makes this form official, you’ll need to continue navigating the separate deadlines on the 1099-MISC.
That said, chances are high that this change is coming. When it eventually does, you’ll want to be equipped to file it. The 1099-MISC can be a confusing form, even on its own. Adding another type of 1099 to the mix is enough to make even the most tax-savvy business owner skeptical. That’s where AMS comes in.
Our W2 and 1099 Software is always up to date with the IRS’s recent changes. If the 1099 NEC becomes standard for American tax filers, you can use our software to get the filing correct.