Oct 06, 2020

The NEW 1099 NEC and Common 1099’s

 

The NEW IRS Form 1099 NEC

 

IMPORTANT:

The IRS decided to create a separate form to report the Box 7 revenue. Form 1099-NEC is not a replacement for Form 1099-MISC. Form 1099-NEC is only replacing the use of Form 1099-MISC for reporting independent contractor payments.

The reason there was an issue with 1099-MISC Box 7 (non-employee compensation) when the IRS/SSA changed the filing deadline for Box 7 revenue to January 31. This created a situation where there were actually two deadlines for the same form. As you would expect this caused some confusion for many businesses. Many were actually fined for late filings for missing the January 31 deadline.

 

NOTE: 

Again, use Form 1099-NEC to report non-employee compensation. “Non-employee Compensation” includes the following payment types to independent contractors: Commissions, Fees, Prizes, Awards, and Other forms of compensation for services.

 

Commonly Filed 1099’s:

IRS Form 1099 MISC

Be sure to report each payment in the proper box because the IRS uses this information to determine whether the recipient has properly reported the payment. With the addition of the 1099 NEC the 1099 MISC has significant changes for 2020 reporting.

Report on Form 1099-MISC only when payments are made in the course of your trade or business. Personal payments are not reportable.

The 1099 MISC is by far the most commonly filed 1099. It is a catch-all  form used to report a variety of payments. According to the IRS businesses should file the Form 1099-MISC for each person to whom you have paid during the year:

• At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest.
• At least $600 in:
• Rents.
• Services performed by someone who is not your employee.
• Prizes and awards.
• Other income payments.
• Medical and health care payments.
• Crop insurance proceeds.
• Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish.
• Generally, the cash paid from a notional principal contract to an individual, partnership, or estate.
• Payments to an attorney.
• Any fishing boat proceeds.

 

You must also file Form 1099-MISC for each person from whom you have withheld any federal income tax (report in box 4) under the backup withholding rules regardless of the amount of the payment.

 

IRS Form 1099 INT

The 1099 INT form is used to report interest income paid in the course of doing business. Interest from personal activity should not be reported. File Form 1099-INT for each person:

• To whom you paid amounts reportable in boxes 1, 3, and 8 of at least $10.
• For whom you withheld and paid any foreign tax on interest.
• From whom you withheld (and did not refund) any federal income tax under the backup withholding rules regardless of the amount of the payment.

Exempt recipients that you are not required to file Form 1099-INT for payments are, but not limited to, a corporation, a tax-exempt organization, any individual retirement arrangement (IRA), Archer medical savings account (MSA), Medicare Advantage MSA, health savings account (HSA), and a few more. For a complete list go to the IRS website.

 

IRS Form 1099 DIV

The 1099 DIV is used to report dividends paid related to stock ownership. According to the IRS, certain distributions commonly referred to as "dividends" are actually interest and are to be reported on Form 1099-INT. These include so-called "dividends" on deposit or on share accounts in cooperative banks, credit unions, domestic building and loan associations, domestic and federal savings and loan associations, and mutual savings banks.

The 1099 DIV should be filed to report for each person:

• To whom you have paid dividends (including capital gain dividends and exempt-interest dividends) and other distributions on stock of $10 or more,
• For whom you have withheld and paid any foreign tax on dividends and other distributions on stock,
• For whom you have withheld any federal income tax on dividends under the backup withholding rules, or
• To whom you have paid $600 or more as part of a liquidation.

 

IRS Form 1099 R

The 1099 R is used to report distributions from retirement funds. Business should file Form 1099-R to report Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., for each person to whom you have made a designated distribution or are treated as having made a distribution of $10 or more from profit-sharing or retirement plans, any individual retirement arrangements (IRAs), annuities, pensions, insurance contracts, survivor income benefit plans, permanent and total disability payments under life insurance contracts, charitable gift annuities, etc.

The 1099 R form should also report on Form 1099-R death benefit payments made by employers that are not made as part of a pension, profit-sharing, or retirement plan.

 

Summary

The filing deadline for recipient 1099s is January 31 annually. If you have further questions regarding the filing requirements and exemptions from filing you should consult the specific instructions for the form in question at the irs.gov site.