By Matthew Trine
Beginning with the tax year 2020, all employers who remit nonemployee compensation to any vendor must use Form 1099-NEC. This form, like other 1099s, is generally due on January 31; however, in 2021, the due date is February 1, as January 31 is a Sunday.
Reissuing Form 1099-NEC, last seen in 1982, required Form 1099-MISC alterations, as nonemployee compensation was historically reported on line 7. Prospectively, nonemployee compensation such as payments to independent contractors or specific professional fees will be reported on Form 1099-NEC. This includes payments to individuals, partnerships, estates, and some corporations.
Prepare your organization by familiarizing yourself with the revised instructions to Forms 1099-MISC, 1099-NEC, and 1096. Additionally, ensure that your software is updated and determine how the developer has facilitated the change. Each software vendor may have a recommended layout for the modified 1099 forms. Review your vendor records and determine that payments are correctly classified. Furthermore, order the correct quantity and layout for each form type, and allow time for a proof run of the required reporting.
For further information:
SHRM article "What is the difference between IRS Form 1099-NEC and Form 1099-MISC?