The Form 1099-MISC has been used in the past to report nonemployee compensation and other miscellaneous payments to recipients and the IRS. According to the IRS website, payers should file for each person to whom you have paid during the year:
- At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest.
- At least $600 in:
- Prizes and awards
- Other income payments
- Medical and health care payments
- Crop insurance proceeds
- Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish
- Generally, the cash paid from a notional principal contract to an individual, partnership, or estate
- Payments to an attorney
- Any fishing boat proceeds
In addition, use Form 1099-MISC to report that you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment (Source IRS.gov).
Beginning January 2021, payers will no longer report nonemployee compensation, such as payments to independent contractors, on Form 1099-MISC box 7. Payers will need to report 2020 nonemployee compensation on the new Form 1099-NEC. Any payments that were historically reported in box 7 of Form 1099-MISC will now be reported on Form 1099-NEC box 1. All other miscellaneous payment types besides nonemployee compensation will continue to be reported on Form 1099-MISC as in the past.
You must report a recipient’s nonemployee compensation on Form 1099-NEC if both of the following conditions are met:
- You made payment(s) to unincorporated businesses or individuals for services performed on behalf of your business, and
- You made total payments of at least $600 during the year to that recipient.
Payers are required to provide Form 1099-NEC to the recipient and file with the IRS by January 31 (February 1 in 2021 since January 31 falls on a Sunday). Form 1099-MISC is also due to the recipient by February 1, 2021; however the IRS copy is not due until March 1, 2021 if filing by paper or March 31, 2021 if filing electronically.
Please contact a member of our tax team to discuss any questions you may have regarding Form 1099-NEC or Form 1099-MISC for 2020.