The IRS has made a major change to 2020 tax reporting that will impact business owners and tax professionals. Form 1099-NEC has recently been released, replacing Form 1099-MISC box 7 data for reporting non-employee compensation beginning with the reporting of 2020 tax info. This information comes from efile4biz.com.
The Purpose of Form 1099-NEC
The new 1099-NEC (NEC stands for Non-Employee Compensation) is based on an old form the IRS stopped using after 1982. The requirements to file non-employee compensation on the reinstated 1099-NEC are the same as had been in place for the 1099-MISC with box 7 data.
Specifically, the new 1099-NEC will capture payments of $600 or more to service providers — typically work done by an independent contractor who is a sole proprietor or member of a partnership. Examples include graphic designers, web developers, cleaning professionals, freelance writers, landscapers, home health care assistants and other self-employed individuals.
It's important to note that you must also file Form 1099-NEC (report in box 4) for anyone you withheld federal income tax under the backup withholding rules, regardless of the amount.
Read more detail about the new form 1099-NEC and submission guidelines here.