Learn the difference between forms 1099-NEC and 1099-MISC and find out which one should your business submit in the tax year 2020-2021.
Business taxpayers are in for a twisty New Year with the re-introduction of the Form 1099-NEC. This new form (it’s actually not that new) has left many business taxpayers perplexed as most are not sure if they are required to file this form to the IRS.
Are there any exceptions? Are certain businesses exempt from filing 1099-NEC? How does this new form affect the default 1099-MISC filing?
In This Blog, We Will Cover
- The difference between forms 1099-MISC and 1099-NEC
- Forms that your business is required to file for this tax year
- When to file the 1099-MISC and 1099-NEC forms in 2020-2021
- How to e-File 1099-MISC and 1099-NEC forms safely
So, let’s get into it.
What’s The Difference Between Form 1099-MISC and Form 1099-NEC?
First things first. Let’s understand the fundamental difference between these 1099 forms.
Form 1099-MISC
A 1099-MISC form is used to report the miscellaneous incomes that your payees have received from your business. For example, if your business has paid rent, made medical and health care payments, or paid money to a legal attorney for their services, then you have to report such payments in the 1099-MISC form.
Learn more about what should be reported in Form 1099-MISC for the tax year 2020-2021 here.
Form 1099-NEC
A 1099-NEC form is used to report the payments your business has made to independent contractors or vendors for their services. For example, if you paid a designer for designing your business logo, then such payments are considered to be “nonemployee compensations”.
As the name suggests, a 1099-NEC form deals exclusively with ‘nonemployee compensation’ (NEC) that a business has made through the course of business or trade in the tax year.
Learn more about what should be reported in Form 1099-NEC for the tax year 2020-2021 here.
Which Form Should I File For The Tax Year 2020-2021?
If you are a business taxpayer, then you are required to file Form 1099-MISC and Form 1099-NEC for the tax year 2020-2021 to the IRS (regardless of your organization being a for-profit or nonprofit entity).
Learn more about it here.
You do not need to file Form 1099-NEC if you have not made any payments to independent contractors.
You do not need to file Form 1099-MISC if you have not made any payments in the course of your business.
However, it is close to impossible for a business to function without making payments for one thing or another. So, it is likely that you must have made some form of payment to someone and you need to check if those payments fall within the guidelines of the IRS.
Bonus Tip:
It’s always safe to be in the good books of the IRS and comply with the IRS. Avoid penalties, prison time, and other unpleasant experiences by filing your forms to the IRS before the due date. At the same time, do not be in a rush to file your forms just for the sake of filing. Make sure that your forms show accurate information.
When Should I File Forms 1099-MISC and 1099-NEC?
The PATH Act, P.L. 114-113, Div. Q, sec. 201 removes the automated 30-day extension for 1099 forms, which were previously due for filing by the end of February.
However, with the re-introduction of the Form 1099-NEC and the updates made to speed up the filing process, all businesses are required to file their 1099 forms (which includes Form 1099-NEC) on or by the 31st of January 2021.
Fortunately, the 31st of January falls on a weekend, which means that businesses have until the 1st of February 2021 to file their 1099 forms to the IRS.
Special Note for 1099-NEC Filings:
Businesses that have made payments to independent contractors or vendors in the course of business for the tax year 2020-2021 have to file their 1099-NEC forms to the IRS on or by the 1st of February 2021, along with other 1099 forms.
How to e-File 1099 Forms Safely?
Given the current restrictions in place due to the Covid-19 global pandemic, many businesses are looking at filing their forms online because:
1. It’s safer
2. It’s easier.
The best part about e-filing is that you cut down on effort, paperwork, money, and dependency on resources by at least 50% (we’re not kidding).
Before you go on a Google search spree to find the best e-filing platform for your business, we recommend that you check out Tax1099. It’s trusted by 150,000+ businesses like yours and complies with the IRS and state and federal governments (all 50 states).
What’s more? You can choose from 40+ forms from Tax1099’s form directory and e-file the ones you want (easily) with the dynamic and secure integrations available. Did we tell you that Tax1099 is a two-time ‘Accountex User Favorite’ award winner for providing super simple tax form filing solutions?
Tax1099 is trusted and vouched by leading business news leaders, such as Inc., Entrepreneur, Forbes, Business Insider, and other tax compliance companies like Intuit.
You can start by creating a free Tax1099 account now and get started. Remember that Tax1099 does not charge you anything until you decide to submit your forms to the IRS. And when you do pay, each form will cost you as little as $0.55.
Head over to Tax1099 today.
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