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IRS Rules for Filing Form 1099-Misc and Form 1099-NEW for the 2020 Tax Year

December 14, 2020

1099-MISC & 1099-NEC

Below is important information regarding Internal Revenue Service requirements for issuing Form 1099-MISC and Form 1099-NEC for the 2020 tax year.  Form 1099-NEC is new for 2020 and is used to report nonemployee compensation formerly reported on Form 1099-MISC.  Individuals who conduct a trade or business reported on their individual income tax return (including Schedule C, E, or F) are subject to these reporting rules.  Please review this information carefully, as the IRS imposes significant penalties for failing to provide these tax forms to all required recipients by the statutory deadlines

Form 1099-NEC

You must file Form 1099-NEC for each person (individual, partnership, or estate) in the course of your business to whom you paid at least $600 during the year for (1) services performed by someone who is not your employee, or (2) payments to an attorney for legal services.  Nonemployee compensation includes payments to independent contractors and payments to attorneys who provided legal services in the course of your trade or business.  There is a filing exception for certain payments made to corporations, but this exception does not apply to attorney payments.  You must also file Form 1099-NEC for each person for whom you have withheld any federal income tax under the backup withholding rules, regardless of the amount of the payment.  Form 1099-NEC must be furnished to the recipient and filed with the IRS by February 1, 2021.    

Form 1099-MISC

You must file Form 1099-MISC for each person (individual, partnership, or estate) in the course of your business to whom you paid at least $600 during the year for rent, royalties, other income not reportable on Form 1099-NEC, prizes and awards not for services performed, gross proceeds paid to an attorney in connection with legal services, and medical and health care payments.  Certain other payments are also reported on Form 1099-MISC – please contact us if you have questions.  There is a filing exception for certain payments made to corporations, but this exception does not apply to attorney payments.  You must also file Form 1099-NEC for each person for whom you have withheld any federal income tax under the backup withholding rules, regardless of the amount of the payment.   Form 1099-MISC must be furnished to the recipient by February 1, 2021 and must be filed with the IRS by March 1, 2021 (if filed on paper) or by March 31, 2021 (if filed electronically).

If you would like our assistance with preparing your required Forms 1099 for 2020, we will need the following information:

-       Service provider's complete name

-       Employer Identification Number (if a business) or Social Security Number (if an individual)

-       Complete mailing address of service provider

-       Total dollar amount you paid to the service provider during 2020

 If you are unable to provide us with this information, we can analyze your accounting records/data and determine who should receive Forms 1099 from you for the 2020 year.  We will need you to provide us with the Employer Identification Number or Social Security Number, as well as the mailing address, of each service provider to whom you must issue Form 1099.

If you would like our assistance with preparing your Forms 1099 for 2020, we will need all of the above information for each of your 1099 recipients (or in the alternative, a complete copy of your 2019 accounting data) no later than Friday, January 8, 2021.   

PLEASE NOTE:  The ability to obtain an extension of time to file Form 1099-NEC is very limited.  It is not automatic, one of five very specific criteria must be met, and only one 30-day extension of time to file is available, if you meet the specific criteria.   Form 1099-MISC filers can request an automatic extension of 30 days from the original due date, but the ability to obtain an additional 30-day extension is limited by the same criteria as mentioned above for Form 1099-NEC. 

If we provide payroll services to your business, we will also need your 2020 payroll data no later than Friday, January 8, 2021 in order to meet the February 1 deadline.

Please contact Heather Starnes or Melissa Manshack at 901-761-3003 if you have any questions regarding these payroll reporting requirements.  Thank you for the opportunity to serve you.

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