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 Form 1099-MISC 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:
    • Rents
    • 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).

Nonemployee Compensation

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:

  1. You made payment(s) to unincorporated businesses or individuals for services performed on behalf of your business, and
  1. 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.