In 2017, the IRS made a change that confused businesses and organizations required to file Form 1099-MISC. It was a decision that hindered the IRS’s ability to track 1099-MISC compliance and, ultimately, brought Form 1099-MISC’s reign as the premier, non-wage information-return to an end.
The IRS changed the due date for 1099-MISC Forms reporting Nonemployee Compensation to January 31st of the following year. This due date applied whether the returns were filed by paper or electronically. But, and here’s what cause the confusion, Forms 1099-MISC reporting anything other than Nonemployee Compensation retained the old due date of February 28th if paper-filed and March 31st when submitted electronically.
The purpose of this change made sense – increase nonemployee compensation compliance by receiving the information earlier (see our article, 1099 Noncompliance Can Destroy Your Business). The dueling due-dates, however, created a giant headache for businesses, software companies, and IRS programmers. They also did little to increase compliance.
Re-Enter Form 1099-NEC: In 2019, the IRS threw up its exasperated hands and cried, “What to do?” At that exact moment, a courageous hero wearing a green eyeshade cap leaped from his seat. “I know, let’s bring back Form 1099-NEC,” he announced. A brief silence followed. Then the IRS replied, “What’s a 1099-NEC?”
Form 1099-NEC reports Nonemployee Compensation to payees and the IRS. The return was used until 1983 when Form 1099-MISC added Nonemployee Compensation to its reporting repertoire. 1099-MISC reported nonemployee compensation in Box 7 for over thirty years. Then, in July of 2019, the IRS announced Box 7’s reassignment to direct sales and the reinstatement of Form 1099-NEC. The first year Form 1099-NEC is required is 2021 for payments made in 2020.
What is Nonemployee Compensation: Nonemployee compensation are payments made for services during the calendar year to unincorporated individuals and businesses who are not employees. There is, however, an exception for incorporated attorneys and law firms, which is covered extensively in Overnight Accountant’s 1099-NEC and 1099-MISC Training Course. Form 1099-NEC is required when annual payments for services equal $600 or more.
1099-NEC Due Dates: Form 1099-NEC is due to both the payee and the IRS by January 31st of the reporting year. The due date remains the same even if returns are filed electronically with the IRS. If January 31st falls on a weekend, the due date is the following business day.
Form 1099-MISC Still Required: Although Form 1099-NEC may have alleviated some due-date confusion, it didn’t lessen the reporting burden of businesses and organizations. On the contrary, it just gave them another information return file. Many types of payment still require Form 1099-MISC, chief among them are various types of rent.
Form 1099-NEC and Form 1099-MISC Training:
The Treasury Department has neared its wits end when it comes unreported income and outright fraud caused by businesses and organizations not filing their 1099s. The formula is simple: When a business, nonprofit, church, HOA, or government agency doesn’t submit Form 1099-NEC or 1099-MISC as required, those receiving payment will NOT report the income on their tax returns. But, then 1099s get filed, the revenue gets reported and taxed. Simple.
Measures to increase compliance include perjury-trap questions, super-large penalties indexed for inflation, and increasing enforcement of backup withholding rules. We discuss these measures in the article, 1099 Noncompliance Can Destroy Your Business. It is critical that you, your employees, and your clients understand Form 1099-NEC and 1099-MISC rules. To help you achieve this end, we created the Form 1099-NEC and Form 1099-MISC Training Course.
In this course, we teach:
The course is classroom-ready and includes a workbook, answers guide, exam, and completion certificate. It also dovetails perfectly with our Employee vs. Independent Contractor Training Course.
Please click to learn more about 1099-NEC and 1099-MISC Training.
All courses and articles are for informational purposes only and do not constitute tax advice. Taxes are complicated - do not act on course information without consulting a professional. Always refer to treasury regulation before making any tax decision. Read the full disclaimer.
This course package is thorough and will give you a solid handle on how to optimize your business expenses to minimize your taxes and keep appropriate records to handle any IRS challenges. Only want to dive into a particular topic? Jump to that video and scan forward to where your issue is addressed. Or watch the whole series to learn it all!- Josh, Charles Town, WV, Real Estate Agent Tax-Cut Library, Agent Edition Course
I thought the course on 1120-h was excellent and have shared your website with other hoa board members. It was clear to me that Brett understood a volunteer HOA board that could not afford tax accountant guidance.- Terri S, Henrico, VA, 1120-H Basics Course
I haven’t practiced in the accounting field in quite some time and wanted a refresher. The Overnight Account course 1099-Misc Basics was very helpful! It was simple to follow along and understand each section. I would highly recommend this course! Staff were quick to answer my question as well. I love that I can review the modules again, if needed, at any time. I will definitely be using them again for more classes.- Tammy, Anchorage, AK, 1099-MISC Basics (Training Edition) Course
The course was excruciatingly detailed, which I appreciate. I definitely recommend this course to anyone who even thinks they may need it.- Greg, Brookfield, IL, 1099-MISC Basics Course
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