What Is the Purpose of the New Form?
Form 1099-NEC has been introduced to report nonemployee compensation that your business pays for services performed by a person who is not an employee. In the past, these payments to attorneys, independent contractors, directors, etc. were reported on Form 1099-MISC in box 7.
Why the Change?
Beginning in 2015, there were different due dates for Forms 1099-MISC depending upon whether they you were reporting nonemployee compensation or other payments. Forms reporting nonemployee compensation were due January 31 and all others were due February 28. The process of having multiple due dates for the same form was cumbersome and confusing. As a result, the reporting of nonemployee compensation has been moved to the new form 1099-NEC and the reporting of other payments remains reportable on form 1099-MISC.
Who Must File?
Anyone who previously filed Form 1099-MISC to report nonemployee compensation must now use Form 1099-NEC. The threshold remains set at $600 and the rules for reporting remain the same as they have been, the only change is that now it is on a new form. All other payments besides nonemployee compensation remain reportable on Form 1099-MISC.
When Is It Due?
The new Form 1099-NEC is due January 31, which remains the same as the due date previously in place for Forms 1099-MISCs reporting nonemployee compensation. For all other reportable payments, the Form 1099-MISC will have a single due date of February 28.
Remember timely filing is important as penalties for late filing can be as high as $250 per 1099 and add up quickly. Contact your HSC advisor for further assistance with your reporting obligations or for any questions you may have in classifying these types of payments.