5 Things to Know About New 1099-NEC for Nonemployees

As year-end approaches, one thing to remember is that the 2020 tax year marks a change in how income for nonemployees is reported to the IRS. Here are 5 things to know:

1. The Form 1099-MISC used in prior years to report income for nonemployees is replaced by Form 1099-NEC beginning with the 2020 tax year (tax reporting to be done in January 2021). 

2. Income from stock compensation will be reported in Box 1 of the new form. This is a change from the Box 7 used on Form 1099-MISC.

3. Income from prior years (2019 and prior) should still be reported on a Form 1099-MISC. For example, if the company forgot to send a 1099-MISC to somebody in 2019, this is rectified by still sending a 2019 Form 1099-MISC, not the new 1099-NEC.

4. In addition to stock compensation for non-employees, director fees should also be reported on Form 1099-NEC.

       5. Reporting is required for payments of $600 or more, same as the 1099-MISC.

Before mailing Form 1099-NEC to nonemployees, be sure you have the correct address. This is especially important this year, as there has been much mobility during the pandemic. For more tips on year-end preparation, see the October 22 blog on "3 Things for Your Year-End Checklist."