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IRS Releases the Draft 1099-NEC for Nonemployee Compensation!

IRS Draft 1099-NEC for Nonemployee Compensation Reporting

As of July 24th, 2019 the IRS has released the DRAFT version of the 1099-NEC Nonemployee Compensation tax form. The 1099-NEC is designed to separate out the Box 7 Nonemployee Compensation, from the 1099-MISC, onto its own tax form.

The 1099-NEC is designed to separate out the Box 7 Nonemployee Compensation, from the 1099-MISC, onto its own tax form. The IRS rationale is that separate reporting deadlines for NEC and non-NEC amounts on Form 1099-MISC has proven challenging for many businesses. Thus, the agency has revived a previously decommissioned tax form, the Form 1099-NEC, as the solution to this dilemma.

IRS Link - Draft 1099-NEC Tax Form

When Does the New 1099-NEC Become Effective?

The 1099-NEC is scheduled to become effective in Tax Year 2020 (which is reported in Calendar Year 2021). However, the 1099-NEC is still only a draft form and is subject to change by the IRS.

The IRS draft instructions for the 1099-NEC are still not publicly posted.

Potential Implications of the 1099-NEC Form

The potential implications of the 1099-NEC form are far reaching. If the 1099-NEC becomes a reality then we can expect a number of changes and downstream implications. Some examples of the possibilities are listed below:

  • 1099-MISC Modifications -The 1099-MISC Box 7 amount for nonemployee compensation, and the Box 9 checkbox, would need to be removed from the 1099-MISC tax form.
  • Payment Tracking -Businesses will have to track nonemployee compensation payments separately from other 1099-MISC payments (if previously being tracked together).
  • State Income & State Withholding -Business will be responsible to separate the amount of state income and state withholding that is attributable to Nonemployee Compensation (instead of across all payment boxes on the 1099-MISC).
  • State Direct Reporting -Each individual state will have to review the new tax form and release their own requirements for state direct reporting. Hopefully, the new form will be adopted into the IRS Combined Federal/State Filing Program to help reduce the reporting burden on businesses. However, that is yet to be seen.

eFileMyForms Support for the 1099-NEC

The 1099-NEC will be fully supported by eFileMyForms. The 1099-NEC will be able to be imported, or manually entered, and then submitted for printing, mailing, and/or e-filing as would any other form.

Additionally, please continue to check our News Articles section, or our emailed newsletters, for any IRS updates!






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