Updated: Jan 2, 2021
Traditionally, businesses have used one form – Form 1099-MISC – for reporting of payments made to nonemployees as well as other miscellaneous payments . Starting with year 2020, there are two forms with their own specifications - Form 1099-NEC for reporting of nonemployee compensation and 1099-MISC for other payments.
What is Form 1099-NEC?
If you’re involved in a trade or business, you must file Form 1099-NEC to report any payments of $600 or more made for services performed by someone who is not your employee (including parts and materials). Common examples of nonemployees are independent contractors or attorneys you pay for their legal services.
Generally, you’re required to file a Form 1099-NEC if you meet the following conditions:
You paid at least $600 to a nonemployee payee during the year
You paid for services in the course of your trade or business, not personal
You paid an individual, partnership, estate. Generally, payments to a corporation (including a LLC that is treated as C or S Corporation) are excluded, with a few exceptions.
You’ll have to complete one Form 1099-NEC for each payee and file with the IRS on or before February 1, 2021, using either paper or electronic filing procedures. You also must furnish the recipient with a statement by January 31, 2020.