What is the difference between 1099-MISC and 1099-NEC?
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Last modified 12/24/2020 5:08:55 AM EST |
Added by TaxBandits Team
Until 2019, payers used Form 1099-MISC for reporting income payments made to independent contractors, including royalties, rent, and other non employee compensations.
At the beginning of 2020, the IRS announced Form 1099-MISC Box 7; nonemployee compensation would be replaced and a separate form would be used to report only the non employee compensations, i.e., 1099-NEC.
This eliminates the ambiguity of having two filing deadlines for the same form.
Let’s see how 1099-MISC is different from 1099-NEC
Form 1099-NEC was drafted to specifically report nonemployee compensation whereas Form 1099-MISC can be used to report other miscellaneous expenses.
It is important to note that Form 1099-NEC is not a replacement for 1099-MISC. Form 1099-NEC is just replacing the use of 1099-MISC for reporting independent contractor payments.
According to IRS, any combination of the following four conditions qualify as reportable non-employee compensation:
- Payments made to someone who is not your employee.
- Payments made for services in the course of your trade or business.
- Payments made to an individual, partnership, estate, or, in some cases, a corporation.
- A Payment of $600 or more for the calendar year.
Note: Due to the removal of box seven from 1099-MISC, the IRS has released the revised version of Form 1099-MISC.
Every business employing independent contractors should check out TaxBandits, an IRS-certified e-filing service provider to e-file and mail these returns to the IRS and recipients respectively.