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The IRS Resurrects Form 1099-NEC After a 38-Year Absence

Mark H. Levin, CPA, M.S. (taxation)
Published Date:
Aug 5, 2019


Beginning in 2021, for nonemployee compensation paid in 2020, payors of nonemployee compensation will no longer report it on Form 1099-Misc; they will report it on a new Form 1099-NEC. The prior version if the Form 1099-NEC was last used in 1982.

On July 24, the IRS issued a draft of the Form 1099-NEC, which is due on Jan. 31 of the year following payment of the income required to be reported on the form. A copy of this draft form appears above. 

The IRS found it necessary to remove nonemployee compensation from Form 1099-MISC and have it reported instead on the new Form 1099-NEC. Besides nonemployee compensation, Form 1099-MISC was used to report rental income, as well as royalty income and several other types of income. Prior to the Protecting Americans from Tax Hikes Act of 2015 (PATH Act),Form 1099-MISC was due on Jan. 31 of the year following payment of the income required to be reported on Form 1099-MISC. However, the PATH Act created dual due dates for filing Form 1099-MISC, as follows: 

• March 31 if filed electronically, as long a the Forms 1099-MISC do not contain any nonemployee compensation reporting (IRC § 6071(b)); but
• Jan. 31 if there is if there is any nonemployee compensation to be reported (IRC § 6071(c))

The introduction of dual due dates for Form 1099-MISC caused a problem for those taxpayers who have to file a Form 1099-MISC reporting both nonemployee compensation and any other type of income. Taxpayers must file the Form 1099-MISC by Jan 31 for all income required to be reported, not just for nonemployee compensation. However some taxpayers who had both nonemployee compensation and any other type of income to report on their Form 1099-MISC filed two sets of Forms 1099-MISC: one set by Jan. 31, to report nonemployee compensation paid, and another set by March 31 to report all other types of income required to be reported on Form 1099-MISC.

Since the IRS computers were unable to apply two different due dates to electronically filed Forms 1099-MISC that were filed after Jan. 31, if a single Form 1099-MIsc had an entry for nonemployee compensation, the entire set of Forms 1099-MISC that were electronically filed by the payor would be considered filed late, and the IRS would charge late filing penalties on all the Forms 1099-MISC.

The issuance of this new Form 1099-NEC will remove the problem of dual due dates, thus simplifying the filing of Form 1099-MISC and the new Form 1099-NEC for those taxpayers who are required to report nonemployee compensation paid in 2020.

Mark H. Levin is an adjunct assistant professor of accounting and taxation at York College/CUNY.

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