Q. Can you provide any information or clarification related to a new form 1099-NEC for tax year 2020?
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A draft of the new Form 1099-NEC, “Nonemployee Compensation” for tax year 2020, has been released by the IRS at https://www.irs.gov/pub/irs-dft/f1099nec--dft.pdf. No draft Instructions for Form 1099-NEC have yet been posted.
This was a recommendation of the Information Reporting Program Advisory Committee to the IRS (IRPAC) in 2018. A Form 1099-NEC was in use 40 years ago, but was discontinued. IRPAC recommended the reintroduction of a 1099-NEC to alleviate operational burdens caused by the change in filing due date for all box 7 Form 1099-MISC nonemployee compensation filings to January 31 (with no automatic extensions available) and the subsequent required procedure of separating late box 7 1099-MISC returns from all other 1099-MISC returns.
IRPAC’s recommendation was made with a caveat: The implementation of a new form type requires significant investment across the information reporting community, so the industry should be involved in development of the form and payer/filers need sufficient time to implement it.
The new 2020 Form 1099-NEC reports nonemployee compensation amounts in box 1. These are payments which currently are reported in box 7 of Form 1099-MISC. The new 1099-NEC reports “direct sales” of $5,000 or more of consumer products to a buyer in box 2. These are income amounts which currently are reported in box 9 for Form 1099-MISC. “Federal income tax withheld” will be reported in box 4 of the new 1099-NEC, the same-numbered box as is used for federal income tax withheld on other 1099s.
The IRS hasn’t yet released a draft of the 2020 Form 1099-MISC, so there’s no publicly available illustration of how the box arrangement on that form will look after deletion of nonemployee compensation and direct sales boxes.
Remember that the new 1099-NEC is for reporting payments your organization will make in calendar year 2020, on the new form which will be due to the IRS by January 31, 2021. The 2019 Form 1099-MISC and its Instructions have both been published on the Forms and Publications website at Forms and Publications (PDF).