Reporting Non-Employee Compensation for 2020

Posted by Gail O'Roke on November 25, 2020

Accountant Working on Tax Forms

Overview

For the 2020 reporting season, the IRS has introduced a new 1099 form: the 1099-NEC (Non-Employee Compensation). For reporting non-employee compensation, this new form will replace the 1099-MISC (Box 7) form, which has been used since 1982.

This change will affect how you report non-employee compensation and how you file other types of miscellaneous payments.

A quick review of the distinction between the two 1099 forms:

The 1099-NEC is used to report a combination of these four conditions:

  • Reportable payment to someone who is not your employee
  • Reportable payment for services in the course of your trade or business
  • Reportable payments made to an individual, partnership, estate, or in some cases, a corporation
  • Reportable payments that were more than $600 for the calendar year

The 1099-MISC is used to report payments that can include:

  • Gross proceeds to an attorney (not fees)
  • Royalty payments of at least $10 during the calendar year
  • Miscellaneous income such as rent, royalties, and health care payments

Next Steps

Tax reporting is a complicated process, and you should speak to your accounting or tax preparation consultant so that you can choose the correct forms and formats that you’ll need to close out 2020. However, if you would like to learn more about the distinction between the 1099-NEC and 1099-MISC, we recommend visiting this 1099-NEC resource page that includes a comprehensive guide and instructional video.

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About the Author

Gail O'Roke has 35+ years of experience in the printing industry. She served on the Print Services and Distribution Association Board for 7 years, culminating in a celebrated term as only the third female and youngest-ever President in the 50-year history of the national association. Ms. O’Roke has published frequent articles in Print Solutions, and has won numerous awards, including the prestigious PSDA Presidents Award. Today, she is proud to manage the best sales and service team in the marketplace at NDS forms division.

 

 

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