Knowledge and Insights
For the 2020 tax year, the Internal Revenue Service (IRS) and State Taxing Authorities are requiring businesses to file Forms 1099 MISC and NEC (new for 2020) for any payments of $600.00 or more made to independent contractors that are not an S or C corporation in the course of your trade or business. These independent contractors include sole proprietorships and Limited Liability Companies (LLC). Generally, the amounts reported would be for services, rents, other income, and non-employee compensation. It also includes gross proceeds paid to an attorney (the exemption from reporting payments made to corporations does not apply to payments for legal services).
Previously, Form 1099-MISC was used to report all nonemployee compensation payments, however new for 2020 the Form 1099 NEC is being reintroduced to report payments for services and non-employee compensation separate from other miscellaneous payments. The new form with a mandatory filing deadline of January 31 is in an effort to avoid late filing notices associated with the timing differences in reporting other income versus nonemployee compensation.
To gather the information necessary, it might be helpful to run a report from your general ledger or cash disbursement records of payments to vendors to determine the vendors for whom you will be required to file.
Once you have identified the vendors for whom you are required to file Forms 1099 MISC or Form 1099 NEC, your accountant will need the following information for each vendor:
- Full name of the Vendor and/or Company
- Tax classification of the vendor’s business (i.e. individual/sole proprietor, LLC, etc.)
- Vendor’s social security number or if a company, the Federal ID number (EIN)
- Vendor’s full address
- Amount paid to the vendor during 2020
- IRS Form W-9 Request for Taxpayer Identification Number and Certification. (This form should be filled out by all vendors and kept with your business records to help with the preparation of Form 1099 MISC/NEC).
Mercadien’s Tax Services Group can assist you in preparing Forms 1099 MISC and NEC to ensure your business is in compliance and you are using the correct form. Our team can also help you develop tax planning strategies that are best for your business during these uncertain times. Contact us at email@example.com or 609-689-9700 for more information.
DISCLAIMER: This advisory resource is for general information purposes only. It does not constitute business or tax advice, and may not be used and relied upon as a substitute for business or tax advice regarding a specific issue or problem. Advice should be obtained from a qualified accountant, tax practitioner or attorney licensed to practice in the jurisdiction where that advice is sought.