Who Needs to Complete Form 1099-NEC?
If you are a business taxpayer who pays non-employee compensation of $600 or more (per independent contractor) for payments made beginning January 1, 2020, you will need to complete Form 1099-NEC when filing your taxes in 2021.
Additionally, you must also file Form 1099 for anyone you withheld federal income tax under the backup withholding rules, regardless of the amount.
What is NEC?
NEC, nonemployee compensation, is money you pay to an independent contractor who is a sole proprietor or member of a partnership (e.g. cleaning professionals, freelance designers/writers, web developers, landscapers, home-health care workers, etc.) who performs work for your business. This includes fees, commissions, prizes and awards for services.
Why the new form?
The 1099-NEC was a retired form last used in the 1980’s. It was reintroduced to help to alleviate the confusion caused by separate deadlines for Form 1099-MISC that report NEC in box 7, and all other Form 1099-MISC payments.
When do I need to file?
Filers should complete Form 1099-NEC by February 1, 2021 because the due date of January 31, 2021 is on a Sunday. There’s no automatic 30-day extension to file Form 1099-NEC. If an extension is needed, a business can file Form 8809. However, the IRS will grant a one-time, 30-day extension, only for certain reasons.
For more information, please contact us at 401-831-0200.