1099-NEC - XWiki

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**IMPORTANT 1099 INFO** - Starting in 2020, the IRS has removed Box 7, Nonemployee Compensation, from the 1099-MISC and moved it to form 1099-NEC.

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== **1099-NEC vs. 1099-MISC FAQs** ==

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**Q:** Can I process 1099-MISC & 1099-NEC Recipients all together at once?

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**A:** No. Within Aatrix, each 1099 filing has to be processed separately with the required recipients and a separate 1096.

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**Q:** What if 1099-NEC is not available to select in my Accounting/Payroll Software?

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**A:** You will want to verify that Aatrix is up to date. Start by opening your history or existing reports option and taking the **Automatic Update** if prompted. After you have completed the update, recheck your forms list to see if the 1099-NEC is available. If the report is still unavailable, please contact your Accounting/Payroll Software support for assistance. The Accounting/Payroll Software may need to be updated before processing the new 1099-NEC.

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**Q:** Why are 1099-NEC Recipients showing up in the 1099-MISC process?

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**A:** Most Accounting/Payroll Software have configurations that indicate the type of 1099 a Vendor/Recipient should receive. If you have questions about adjusting the Vendor/Recipient configuration, please contact your Accounting/Payroll Software support for assistance. In the event of a time constraint, the alternative solution would be to remove the Recipient's row from the preparer.

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== **The 2020 Form 1099-NEC** ==

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After a 38-year absence, **Form 1099-NEC** is making a return in the **2020** tax year. Employers will use a revamped form and say goodbye to reporting Nonemployee Compensation **(Box 7) on Form 1099-MISC**.

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== **Overview of Form 1099-MISC** ==

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**Before 2020**, you would include Nonemployee Compensation in Box 7 on Form 1099-MISC. **In 2020**, Box 7 on Form 1099-MISC will turn into "Payer made direct sales totaling $5,000 or more of consumer products to recipient for resale” and Nonemployee Compensation will be reported on Form 1099-NEC.

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== **What is Form 1099-NEC?** ==

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Form 1099-NEC is a form that reports Nonemployee Compensation and any Federal tax withheld. Form 1099-NEC is only replacing the use of Form 1099-MISC box 7.

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Form 1099-NEC is not new; it was last used in 1982. The IRS is reviving the form in 2020 in response to the Protecting Americans from Tax Hikes Act (PATH Act).

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Before the PATH Act, taxpayers could use Form 1099-MISC to report Nonemployee Compensation and miscellaneous income items by February 28 each year. In 2015, however, the PATH Act changed the Form 1099-MISC due date to January 31 for reporting Nonemployee Compensation.

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This change confused employers and taxpayers and caused the IRS to mistakenly treat forms received after the January 31 deadline as late returns.

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The IRS has brought back Form 1099-NEC to separate nonemployee expenses and clear up this confusion.

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== **What do you report on Form 1099-NEC?** ==

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Use Form 1099-NEC to report nonemployee compensation. Nonemployee compensation includes the following payment types to independent contractors:

* Fees

* Commissions

* Prizes

* Awards

* Other forms of compensation for services

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== **Where do you send Form 1099-NEC?** ==

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Like Form 1099-MISC, there are multiple copies of Form 1099-NEC you must distribute.

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Check out each copy and its recipient below:

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* **Copy A** to the IRS

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* **Copy 1** to the State tax department if necessary

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* **Copy 2** and B are for the recipient

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* **Copy C** is for the payer's records

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The 1099-NEC can be electronically filed using the **IRS FIRE** system or mailed directly to the IRS.

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== **What do you include on Form 1099-NEC?** ==

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As a reminder, newly hired independent contractors must fill out Form W-9. Then, use Form W-9 to report Nonemployee Compensation at the end of the year.

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When filling out Form 1099-NEC, include the following information:

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* Business’s name, address, and phone number

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* Business’s TIN

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* Recipient’s name, address, and TIN

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* Total Nonemployee Compensation