New 1099 NEC Form Due on Feb 1st, 2021 | 1099 NEC Filing Deadlines: Do you about the significant changes made in 2020 by the IRS? The IRS has made significant changes in 2020 as to how NEC must be reported. In the past, the compensation paid to non-employees reported through 1099 MISC. but beginning with 2020, the payments made to non-employees must be reported through 1099 NEC.
If you receive income from a source other than earned wages, you may receive Form 1099 NEC. Generally, the income on this form subjects to federal and state taxes. The IRS requires the payee of 1099 Form to report the income on their tax returns.
What is the new Form issued by the IRS for 2020 tax year?
Prior to the year 2020, if you were working as a freelancer or hire a contractor for work, you may either issue or receive a 1099 MISC. Now, the IRS has introduced the new 1099 NEC tax form just for reporting independent contractor income. If you work with a contractor or do contracting work, you need to know about new 1099 Form.
The IRS introduced the new tax form for reporting non-employee compensation made in a tax year. The main reason to revive back 1099 NEC to clear the confusion created by 1099 MISC form. As we know, for the past few years payers used 1099 MISC box 7 to report NEC. Along with this income, they used to report miscellaneous income through 1099 MISC Form. This made the IRS misclassify the Form as late returns and imposed unwanted penalties. To reduce the unwanted penalty risks, the IRS revamped 1099 NEC for reporting payments made in 2020 using new 1099 NEC Form.
When do you report NEC through new 1099 Form?
The requirements for reporting non-employee compensation have not changed. Only the form on which NEC reported was changed. Given below the circumstances to report NEC through the new 1099 Form:
- Services paid in excess of $600 to anyone, not your employee.
- Payments made to independent contractors, freelancers, self-employed individuals on the course of work performed for business or trade.
- Compensations paid to individual attorneys or law firms.
- Fees paid for professional services such as attorneys, accountants.
- Non-employee salesperson commissions that subjects to repayment, but not repaid during the calendar year.
1099 NEC Form 2020 filing period
Notably, unlike the Form 1099 MISC which must be filed by March 1st, 2021 for paper filings and March 31st for e-filing. The IRS Form 1099 NEC must be filed by February 1st, 2021. The due date is the same for both paper filing and e-filing. Form 1099 NEC due to the recipient of the payments by February 1st, 2021. The typical due date for filing Form 1099 NEC and providing a copy to the recipient on January 31st of the following tax year. Since, for the 2020 payments the due date i.e. January 31st, 2021 falls on a Sunday. The payments reported on the next business day when the due date falls on a Sunday or a holiday.
What is the procedure when you miss 1099 NEC deadline?
If your businesses didn’t prepare to fill out Form 1099 NEC online for the 2020 tax year, then you need to file an extension request. When you think your business requires extra time to file 1099 Forms, you can request the IRS for a 30 days extension to submit the Forms.
Beginning in 2021, the automatic 30-days extension will be eliminated for the businesses reporting NEC. But, when certain hardship conditions were met, an extension may be available. Given below the conditions required to file an extension request for reporting non-employee compensation:
- If your business suffered from a disaster that made necessary records unavailable.
- Natural disasters affected the operations of the filer.
- Death, serious illness of the individual who responsible for filing 1099 NEC Form.
1099 NEC tax form provisions
According to the IRS rules and regulations for 2020 tax year, new 1099 tax form provisions given below:
- Report the payments when the payments made to the individual for performing work including parts and materials.
- Cash payments made for fish that the business purchases from anyone engaged in the trade or business of catching fish.
- Payments to attorneys of $600 or more paid in the course of organizations trade or business.
- Regardless of the amount paid, report the amount withheld under backup withholding rules.
IRS 1099 NEC Form penalties for small businesses
Every business owner must remember that the IRS can penalize for not filing the forms on time. The penalties range from $50 to $280 per 1099 for small businesses with average annual gross receipts of $5 million or less for the most recent three taxable years. The amount of penalty based on when you file the correct information return.
The end of 2020 quickly approaching. Now it’s time for businesses to make sure their software and filing systems must be up-to-date. Make sure that you’ve gathered all of your payee’s information correctly. For timely and correct filing, choose E-file 1099. We provide you service to file your 1099 Forms safe and securely. As we have updated to 2020 regulations, you can file 1099 NE without facing any filing compliances.