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Form 1099: 2020 information and updates

It’s that time of year again…

As the new year approaches, that typically means the tax information reporting season begins. For those of us in the profession, it’s back-to-taxes time! For business owners (which includes those who are self-employed or own rental properties), this generally means starting the tax process by preparing Form 1099 in January. 

For the 2020 tax year, the IRS has made a few changes to the historical 1099 reporting:

  • New Form 1099-NEC— Historically, miscellaneous income was reported on Form 1099-MISC. However, for tax year 2020, the IRS will require the use of a “new” Form 1099-NEC (it’s not exactly new – it was last used in 1982) to report all Non-Employee Compensation. Previously, this was reported in Box 7 of Form 1099-MISC.

  • What is reported on Form 1099-NEC? — Non-Employee Compensation includes payments of more than $600 that you made to any one person during the year for services performed by someone that is not your employee or for payments made to an attorney for legal services. This generally includes any payment that you are claiming a deduction for but does not include personal expenses. For example, the gardener on your rental property generally would receive a 1099 but the gardener for your primary residence (personal expense) would not.

  • Yes, Form 1099-MISC is still around — The Form 1099-NEC is only used for reporting certain income payments. All other types of miscellaneous income historically reported on Form 1099-MISC (rents, royalties, other income, etc.) are still reported on Form 1099-MISC. The IRS has just added another form to the pile.

  • When are 1099 forms due? — For the 2020 tax year, Form 1099-MISC/NEC generally must be completed and provided to the recipient by February 1, 2021 (the deadline is technically January 31, 2021, but since that falls on a weekend, you have until February 1st this year). In order to give us sufficient time to prepare these forms on our client’s behalf, we request that we receive all required information (payee information and respective payment amounts) by January 15, 2021.

  • How do I get the information needed for Form 1099-MISC and 1099-NEC? The best way to obtain the information needed to accurately complete Form 1099-MISC/NEC is to send them a Form W-9. They should complete the Form W-9 and return it to you, which provides you with the required information needed. A blank Form W-9 can be found on our website under the Resources Tab – Forms, Documents & Links – Government Forms – Form W-9.

The back-to-taxes time can be stressful, especially when the IRS adds new reporting requirements. We are here to help! Please contact our office if you have any questions or would like our assistance for the 2020 tax year.