The 1099-NEC "Nonemployee Compensation" tax form's draught version was recently made available by the IRS. The separation of the 1099-MISC and 1099-NEC tax forms, as well as any potential federal and state repercussions, are all covered in detail.
The market-leading provider of information-reporting solutions, software, and services for 1099, W-2, 1042-S, ACA, 8966, and CRS Filers, outlines the complicated history and distinction between the 1099-MISC and 1099-NEC tax forms as well as any potential federal and state repercussions.
On July 24, 2019, the IRS made the draught Form 1099-NEC for Nonemployee Compensation available. Nonessential Compensation, or NEC, is now reported by Filers on Box 7 of the Form 1099-MISC, "Miscellaneous Income." However, recent changes to Form 1099-MISC's NEC and non-NEC amount reporting deadlines and e-filing requirements have proven difficult. In order to address these problems, the IRS has moved to reissue Form 1099-NEC.
History of Compensation for Non-Employees
In Tax The IRS switched nonemployee compensation reporting to Form 1099-MISC in 1983 and discontinued Form 1099-NEC. True to its name, the 1099-MISC has evolved into a catch-all for a variety of miscellaneous sources of income, such as rent, royalties, fishing boat earnings, nonemployee remuneration, and more. For the following more than 30 years, this reporting structure was the norm.
Time travel to Tax Year 2017, when the IRS implemented new 1099-MISC form filing deadlines for non-employee compensation (NEC). Whether filed on paper or electronically, the NEC amounts listed in Box 7 were due on January 31. The deadline for all other payments remained March 31st for electronic payments and February 28th for paper ones.
Both software providers and 1099 filers experienced extreme complexity and complication as a result of this single form, multiple dates strategy. The NEC deadline was added as a separate line item to Form 8809, Application for Extension of Time to File Information Returns, by the IRS right away. However, the automatic extension was later removed. The IRS subsequently made issues worse in Tax Year 2018 by mandating that NEC and non-NEC 1099-MISC forms be filed separately. At this crucial juncture, the IRS effectively started demanding that NEC data be submitted on a separate form. Thus, it is a good surprise that the IRS revised the tax form 1099-NEC, which was previously retired.
When Will the New Form 1099-NEC Become Effective?
2020 Tax Year is the anticipated implementation date for the 1099-NEC. Before the form is formally adopted, however, there is still significant work to be done, as with all IRS draught forms and rules. The IRS's draught instructions for the 1099-NEC are not yet available online.
Possible Consequences of the 1099-NEC Form
Once additional IRS rules and guidance are posted, it will be possible to thoroughly analyze the wide-ranging effects of the new 1099-NEC tax form.
Existing 1099-MISC - The Nonemployee Compensation and Box 7 checkboxes on the current 1099-MISC tax form are expected to be eliminated.
Payment/Source System: In order to report on the new tax form, it might need to be able to distinguish between 1099-NEC and 1099-MISC data.
State Withholding and Income - Instead of filling out all the relevant boxes and categories on the 1099-MISC, filers may need to focus just on the state withholding and income that is specifically connected to Nonemployee Compensation.
Federal Reporting - Box 7 for nonemployee compensation was the most often utilized box on the 1099-MISC tax form, which is second only to the 1099-B in terms of usage. The IRS is almost certain to replace the 1099-MISC with the 1099-NEC and coordinate its inclusion in the Combined Federal/State Filing (CFSF) Program.
State Reporting - How various states will respond to this new IRS tax form remains to be seen. If nonemployee remuneration and any appropriate state withholding are transferred to the 1099-NEC, several state regulations that are based on the 1099-MISC will need to be revised.
State Direct Reporting and Increased Penalties
The reinstatement of 1099-NEC "indicates that the IRS is serious about nonemployee compensation reporting and that their attempts to obtain NEC data earlier, in January, has made a dent in stolen identity refund fraud," says Michael Stewart, Director of State Compliance at Form1099Online. The IRS will be better able to penalize late Filers and reject penalty abatement letters that allege confusion and difficulty over the multiple reporting deadlines by splitting out the nonemployee compensation amount onto the 1099-NEC.
"For the purpose of reporting this new 1099-NEC tax form, the states will need to follow the IRS's lead as usual. Many states either use a direct reporting system that resembles the IRS electronic format or the IRS Combined Federal/State Filing (CFSF) Program to acquire their state-specific nonemployee compensation data. All of this would be susceptible to change, and infrastructure would need to be developed both for reporting a new form type directly to some states as well as for adding a new form to the IRS CFSF Program.
Form 1099 NEC filing makes your 1099 tax payment simple and easy.
form1099online.com Online Payment process saves your time and Get filed copy immediately.
Get the answer of the followings How do you file taxes with a 1099?
Can I file a 1099 online?
Do you have to file a 1099 on your taxes?
Who is required to file 1099 A?
How To File A 1099 Form Independent Contractor ?.
Learn to know Preparation for 1099 form and how you can eFile 1099 form in year 2020 , know the limit and when you have to file 1099 form .
Quickbooks 1099 form is generally created for self-employed entities who gather it from the organizations and managers that have used their administrations.so in regards to how to prepare and different ways to file a form you have to read this post for better understanding in case if there is any issue you can contact QuickBooks payroll support.
