This year, you have a new informational form to submit to the IRS at the end of the year. It’s called 1099-NEC. This new form is intended just for Nonemployee Compensation (NEC) vendors and is used by businesses to send to the IRS and to the vendors. This week, I am going to share the high-level details to help you add this task to your to-do list.
Who should get this?
- A nonemployee compensation that made at least $600 in the entire year.
- Services performed by someone who is not your employee (including parts and materials) Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish.
- Payments to an attorney that is not a corporation and LLC.
How to use it?
It’s pretty straight forward as you can see below.
Gather your totals together for each NEC and their important information from your Vendor report after you reconcile your business accounts in January.
2020 1099-NEC modified form:
For each nonemployee, add the totals from your vendor report to Box 1. Add all the payer’s information into the Payer’s section. Put in the Payer’s TIN and Recipient’s TIN. Include the recipient’s legal name and address, city, state, zip code. Add Federal income tax withheld in box 4. Then, in Box 5, add the state tax withheld. In Box 6, Add the state number. In Box 7, add the state income. If you don’t withhold any taxes, disregard these boxes. That’s it.
Add additional information if needed in the other boxes provided. Visit the 2020 Instructions for Forms 1099-MISC and 1099-NEC PDF for more details.
2020 1099-MISC modified form:
Now, remember because this form was created for 2020, the 2020 1099-misc. has been adjusted as well. Below is what that looks like this year moving forward.
2020 1096 modified form:
Be sure you include the totals for both 1099-misc and 1099-NEC plus any other informational forms you needed to complete on the 1096 form. There is a checkbox for 1099-NEC. See image below.
If the software you use to create and print the 1099s does not have the 1099-NEC form, you can order free forms from the IRS and type them up with a manual typewriter if you have one. Here is the link on where to order them: Online Ordering for Information Returns and Employer Returns Order them now and when they are ready, the IRS will send them to you free of charge.
I hope this helps you and your business be more prepared for the end of 2020 and beyond.
If you need additional help with general bookkeeping or a consultation on how to set up your 1099-NEC or 1099-MISC, feel free to contact me.