5 Things to know about the new 1099 NEC
What is the 1099 NEC?
The 1099 NEC is a form the IRS requires all businesses to file when money is paid to an individual (or a business) for services for $600.00 or more. The IRS matches the 1099’s submitted to the individual’s tax return. Because the IRS created a new 1099 NEC, you must change how payments to individuals (or a business) are reported. It is essential to use the proper box. The IRS will use the information to determine if the recipient reported the payment. It is also important to note that personal payments are not reportable. For example, you paid someone to mow your lawn at your personal home. Also, do not forget to send the recipient their copy of the 1099 NEC.
- Non-employee compensation paid to anyone (or a business) who performed a service is now reported on the 1099 NEC form, not the 1099Misc. The 1099Misc is used for rent and other non-employee compensation. So, if you used the 1099Misc in the past, those payments for non-employee compensation will now be reported on this new form.
- 1099-NEC forms are due January 31. As a result, these will need to be done much earlier than in past years.
- Payments to a business or individual over $600.00 per year, who provide a service to your business need to be reported on the 1099- NEC. However, payments made to corporations do not necessarily require a 1099 – NEC to be issued.
- Box 4 is for backup withholding. Backup withholding is required for those who did not provide their TIN. For best measures, get a W-9 filled out before you pay anyone or any business. It is much easier to get the W9 on the front end than wait until the end of the year.
- As a business owner, you must obtain a W9 from any business that performs a service for your business.
For more information here is the link to the IRS Website https://www.irs.gov/forms-pubs/about-form-1099-nec
Disclaimer:
Though I am a tax professional, please seek professional advice from your tax professional. The information provided here is for informational purposes only and should not be viewed as tax advice. I make no guarantee or promise regarding the accuracy, reliability of the information presented. The information on this website is accurate to the best of my knowledge, but there may be omissions, errors, or mistakes. By use of this website, you agree to hold me harmless. I have the right to change how I manage to run my website and change the content at any time.
