Changes are coming this tax year. If you’re already familiar with the new 1099-NEC, you can skip straight to this page to request your new form today. If you’re still one of the many racing to get up-to-speed ahead of year-end, we have what you need to know. At least most of it! You’ll obviously want to consult the IRS website and resources as well, but here are the key items.
What you need to know about the 1099-NEC
The changes are straightforward. NEC is short for non-employee compensation, and the 1099-NEC Box 1 will be used to report exactly that. Simply, the income that the company used to report in 1099-MISC Box 7 will now be reported in 1099-NEC Box 1. Federal withholding for that contract employee will be recorded on in Box 4, and state tax withheld, payer state ID number and state income is reported in Boxes 5, 6 and 7 on the 1099-NEC.
Although the new format is easy-peasy, it’s important to note that most accounting software does not produce the new 1099-NEC forms yet and likely won’t until 2021. MHC can help you now. We have the forms ready to integrate with your ERP system(s) and here’s a little more about that.
However, there are still a couple of unknowns. These are items like corrections to a prior-year 1099-MISC where Box 7 was used for non-employee compensation. This could be tricky, because the 1099-MISC will no longer have a Box 7. In this case, the IRS says any corrections to 2019 should remain on the old form. State requirements are another unknown at this point. The IRS is still contemplating whether the 1099-NEC will be part of the combined Federal/ State program, so make sure you follow their resources to be in the know. One thing is for certain, it’ll be a busy January for anyone involved with 1099s.
If you’re starting to feel the stress now, you’re not the only one. Our year-end planning webinar is available to watch anytime and covers due dates, tax forms, self-service technology and more.
More Ideas for Year-End Tax Planning
It goes without saying that our workplaces look and feel a little different in 2020. Many people are working from home, and while coworkers are still able to see each other’s faces on Zoom meetings (at least the people who have working webcams or change out of their jammies before lunch). But it’s time to start thinking about how employees will access tax documents this year. Distance working does not support interoffice mail.
If you do not have the capacity to fulfill physical document delivery, our team can help out – a huge shout out to Sherry from our team for creating this screencast with more details on our processing services. Or, it might also be time to invest in a document delivery solution that uses automation to electronically deliver documents and saves $0.65 per employee – this solution pays for itself quickly and provides secure access anytime, anywhere. So, as the year wraps up, don’t be caught by surprise, and if there’s anything our team can do to help make your life a bit easier, just let us know.