What you need to know about 2020 Forms 1099-MISC and 1099-NEC

In November 2019, the IRS released the 2020 forms for the 1099‐MISC and 1099‐NEC. The updates to the forms will need to be reflected in the accounting and reporting systems in order to comply with new reporting requirements. While there are several revisions coming to the forms in 2020, here are the ones that are likely to affect the most people:

Box 7 on the 1099-MISC will now be Box 1 on Form 1099-NEC

Box 1 of Form 1099‐NEC for the 2020 tax year will be used instead of Box 7 on the 1099‐MISC for payments of $600 or more in nonemployee compensation. This box will include payments to independent contractors, attorneys, and golden parachute payments.

While attorneys’ fees over $600 should be reported on Form 1099‐NEC in Box 1, gross proceeds paid to attorneys should still be reported on Form 1099‐MISC in Box 10.

Director’s fees will move from the 1099-MISC to the 1099-NEC

Director’s fees should now be reported on Form 1099‐NEC in Box 1, instead of on Form 1099‐MISC.

Code Sec. 409A deferrals will move to Box 12 of the 1099-MISC

Report Code Sec. 409A deferrals in Box 12 of the 1099‐MISC. These deferrals are currently being reported in Box 15a.

NQDC income will be entered in Box 14 of the 1099-MISC

Non‐qualified deferred compensation (NQDC) income belongs in Box 14 of the 1099‐MISC. Any NQDC deferrals (plus earnings) reporting that you make in Box 14 of the 1099‐MISC are includible in gross income, so they also need to be reported in Box 1 of Form 1099‐NEC.

Backup withholding belongs on the 1099-NEC

Any backup withholding, regardless of the paid amount, should be entered in Box 4 of Form 1099‐NEC.

Transit passes are also moving to the 1099-NEC

While transit passes used to be reported on the 1099‐MISC form, they’re moving to Form 1099‐NEC in Box 1. This applies to any passes given to independent contractors that are valued at over $21 per month.

Under certain conditions, parking can be excluded from an independent contractor’s gross income, and would not be reported on the 1099‐NEC.

Due Dates for 2020 Forms 1099-MISC and 1099-NEC

Forms 1099‐MISC and 1099‐NEC must be given to recipients by January 31. Form 1099‐NEC must be filed with the IRS by January 31. Form 1099‐MISC must be filed with the IRS by February 29, if filing on paper, and by March 31, if filing electronically.

If you’re a client with questions, please contact Josh Kaiser at jkaiser@chortek.com or 262-522-8250 or Sherri Haynes at shaynes@chortek.com or 262-522-8274.