1099’s report non-employee compensation to vendors who provide services such as independent contracting, consulting, attorney services, rents, royalties, commissions and much more.
Form 1099 will be separated into two separate forms for 2020: The brand new Form 1099-NEC, (which stands for Non-Employee Compensation,) will be used to report current and deferred compensation to nonemployees, including fees, commissions, awards, prizes, and other forms of payment to independent contractors. Form 1099-MISC will continue to be used to report other miscellaneous income such as for royalties, rents, medical payments, and payments to attorneys.
The biggest change to the old Form 1099 is that Box 7 in the old Form 1099-MISC will now be filed in Box 1 of the new Form 1099-NEC when there is nonemployee compensation of $600 or more. Boxes on the new Form 1099-MISC will be different this year so it will be important to read and review the new instructions when preparing your 1099s this year.
The fourth quarter is the perfect time to make sure you have up to date W-9s on record for your 1099 recipient vendors, and request missing information. Review vendor expense coding so that you can properly prepare and file your 1099’s at year end, avoiding mistakes and scrambling at the last minute. The filing deadlines come quickly after year end; be prepared to file accurate, timely forms for your vendors, and avoid costly fines and penalties. Filing your 1099s electronically is the easiest and most cost effective method to meet your filing requirement.
Author: Laura Whitman, CPA