NEW Form 1099-NEC Nonemployee Compensation

Overview

Form 1099-NEC (Nonemployee Compensation) is a new tax form that businesses will be required to file. Form 1099-NEC replaces Box 7 on Form 1099-MISC to report nonemployee compensation which reflects payments to nonemployee service providers and vendors. This change reflects only a change in reporting and not a change in the rules regarding payment filing requirements.

Nonemployee Compensation

Starting in 2020, payments for services made in the course of a trade or business to US persons will be reported on Form 1099-NEC. Note that Form 1099-MISC still will report other payment types such as rent, other income, and royalties. However, the IRS has rearranged the box numbers for reporting certain income on Form 1099-MISC.

Examples of Nonemployee Compensation

Business taxpayers must file a Form 1099-NEC form for nonemployee compensation if all four of these conditions are met:

• It is made to someone who is not your employee,
• It is made for services in the course of your trade or business,
• It was made to an individual, partnership, estate, or corporation (with exceptions), and
• The payments made to the payee were at least $600 or more for the year.