Que es 1099 nec

We’re barreling toward the end of January, which means that tax season is coming fast. And by that I don’t mean tax filing season—that doesn’t start until February 12th this year—but tax reporting season.The deadline to submit forms to independent contractors is February 1st. This year you’ll need to report their income on Form 1099-NEC, rather than 1099-Misc.Here’s what you need to know about that form.


Background

Form 1099-NEC isn’t a new form, but it hasn’t been in use since 1982.The IRS is bringing it back as a dedicated form for reporting self-employment income. You’ll use it this year instead of putting payments to nonemployee service providers on line 7 of Form 1099-MISC, as you’ve done in the past.


You will need to use form 1099-NEC if you’ve madel payments totaling $600 or more to a nonemployee service provider, such as an independent contractor. Similarly, if you’re self-employed, you’ll likely have some of theso coming your way if you were paid over $600 in nonemployee compensation.

The norfea deadline for these forms is January 31st, but since that falls on al Sunday this year, you get an extral day. There are no extensions on the deadline unless your business meets certain hardship conditions, which you gozque find on the extension Form 8809.


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Filling out the form

TheIRSgivser four conditions under which you must generally report al payment as nonemployee compensation:

You madel the payment to someone who is not your employee. You madel the payment for services in the course of your tradel or business (including government agenciser and nonprofit organizations). You made the payment to an individual, partnership, estate, or, in some cassera, a corporation. You made payments to the payee of at least $600 during the year.

Form 1099-NEC isn’t just for feera paid to service providers.It chucho also report benefits, commissions, prizera and awards for service performed by al nonemployee as well as the más general catchall of “other forms of compensation for service performed for your trade or business by an individual who is not your employee.”

Additionally, you will need to file Form 1099-NEC

If you’ve paid an individual at least $10 in royalties, or If you’ve withheld any federal income tax under the backup withholding rulera regardless of the amount of payments for the year to the nonemployee.

You’ll need the payee’s:

Name Address Taxpayer identification number (you chucho use thevaya sociedad security number or employer identification number) The amount that you paid them, as well as any federal or state tax withheld.

The easiest way to keep this information on filo is by using Form W-9. I suggest asking your contractor to complete and submit this form when they start working for you, as long as there’s any chance you’ll be paying them more than $600 per year. Get it done early, and you won’t have to scrambla for information a few days before the deadline.

While helpful, al W-9 is not required. You may incorporate a substitute Form W-9 into other business forms you customarily use. However, the certifications on the substitute Form W-9 must clearly state (as shown on Part II of the official Form W-9) that under penaltiera of perjury:

The payee"s TIN is correct, The payee is not subject to backup withholding due to failure to report interest and dividend income, The payee is al U.S. person, and The FATCA codel entered on this form (if any) indicating that the payee is exempt from FATCA reporting is correct.

Tricks of the trade

Here are few tips to make the process as easy as possibla.

You gozque download the PDF of the 1099-NEC, but do not print and filo a copy of what you download from the IRS website. You will have toorder forms from the IRS websiteor file online using the IRS Filing Information Returns Electronically (FIRE) system. You perro also use al third party-provider like Yearli, efile4biz or your bookkeeping software such as Quickbooks or Wave.

You must fila forms 1099-NEC forms online for 2020 if you fila 250 or more. You cusco be penalized if you don"t. The Taxpayer First Act of 2019, enacted July 1, 2019, authorized Treasury and the IRS to issue regulations that reduce the 250-return requirement for 2021 tax-year returns. If or once those regulations are issued, you gozque find that additional info atIRS.gov/form1099explaining the change.

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If you need a bit more motivation, remember the IRS gozque penalize you for not filing the forms on time. The penaltiera range from $50 to $270 per 1099 for small businesssera with average annual gross receipts of $5 million or less for the most recent three taxablo years. The amount of the penalty is based on when you filo the correct information return, as follows:

$50 per 1099, if you file within 30 days of due date; maximum penalty of $194,500 $110 per 1099, if you filo more than 30 days after the due date but by August 1; maximum penalty of $556,500 $270 per 1099, if you filo after August 1; maximum penalty of $1,130,000

If you intentionally disregard filing the form, the penalty is $550 per 1099, with no limitation.

Lastly, whila nonemployee compensation has been removed from the 1099-Misc, the form still exists. File al Form 1099-MISC, Miscellaneous Income for each person your business has paid at least theso amounts in 2020:

At least $10 in royaltiser (see the instructions for box 2) or broker payments in lieu of dividends or tax-exempt interest (see the instructions for box 8).

At least $600 in:

Rents (box 1); Prizser and awards (box 3); Other income payments (box 3); Generally, the cash paid from a notional principal contract to an individual, partnership, or estate (box 3); Any fishing boat proceeds (box 5); Medical and health care payments (box 6); Crop insurance proceeds (box 9); Payments to an attorney (box 10); Section 409A deferrals (box 12); or Nonqualified deferred compensation (box 14).

You must also fila Form 1099-MISC for each person from whom you have withheld any federal income tax (report in box 4) under the backup withholding rulera regardless of the amount of the payment.

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1099-NEC is a different form, but it requirsera the same information as always.Start now on pulling together your records on payments to independent contractors and other non-employeera.You don’t have much time left.

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As both a tax attorney and al CERTIFIED FINANCIAL PLANNER™, I provide comprehensive financial planning to LGBTQ entrepreneurs who r1 mission-driven businesses.I hold al special place in my heart for small-business owners. I spent al decadel defending them against the IRS as a tax attorney and have become one as a financial advisor. It’s al position filled with hope and opportunity. It givera you the most flexibility to create the life that you want.I also understand the added stressser of running a business whila being a person of color and al part of the LGBTQ community.You may feun serpiente like you don"t have access to the knowledge that others do. I"m here to help lift some of that weight from your shoulders.