1099-NEC Form vs 1099-MISC Form

1099-NEC Form, is a form that solely reports nonemployee compensation. 1099-NEC is not a replacement for the 1099-MISC Form, it only replaces the use of 1099-MISC Form for reporting independent contractor payments.

Prior to 2020, you would include nonemployee compensation in Box 7 on Form 1099-MISC. In 2020, Box 7 on Form 1099-MISC will turn into “Payer made direct sales of $5,000 or more of consumer products to a buyer (recipient) for resale,” and nonemployee compensation must be reported on Form 1099-NEC instead.

Again, use Form 1099-NEC to report nonemployee compensation. Nonemployee compensation includes the following payment types to independent contractors:

• Fees
• Commissions
• Prizes
• Awards
• Other forms of compensation for services

If you pay an independent contractor nonemployee compensation, separate nonemployee compensation payments from all of your other Form 1099-MISC payments. Starting up again in 2020, fill out Form 1099-NEC if you have any workers you paid $600 or more to in nonemployee compensation.

Where do you send Form 1099-NEC?

Like Form 1099-MISC, there are multiple copies of Form 1099-NEC you must distribute. Check out each copy and its recipient below:

• Copy A: The IRS
• Copy 1: State tax department, if applicable
• Copy B: Independent contractor
• Copy 2: Independent contractor
• Copy C: Keep in your business records

When filling out Form 1099-NEC, include the following information:

• Business’s name, address, and phone number
• Business’s TIN (Taxpayer Identification Number)
• Recipient’s name, address, and TIN
• Total nonemployee compensation
• Federal and state income tax withheld

What is the due date for Form 1099-NEC?

Not only do employers have to keep the new Form 1099-NEC on their radars, but they also need to mark their calendars for a new nonemployee compensation due date. Starting in 2021, send copies of Form 1099-NEC to workers you paid nonemployee compensation to during the year by February 1.

Also file Copy A with the IRS by February 1 each year.

1099-MISC Form, Miscellaneous Income, is an information return businesses use to report payment types, such as payments made to independent contractors. You can also use Form 1099-MISC to report other payments, like royalties and rents.

Form 1099-MISC is like Form W-2 but for independent contractors. Independent contractors use Form 1099-MISC to make tax payments based on what businesses paid them during the year. Send Form 1099-MISC to any contractors you paid $600 or more to throughout the year. Also, file Form 1099-MISC if you make any of the following payments over $600:

• Royalties
• Rent
• Fishing boat proceeds
• Medical and health care payments
• Substitute payments in lieu of dividends or interest
• Crop insurance proceeds
• Excess golden parachute payments
• Gross proceeds paid to an attorney