IRS Launches New Form Replacing 1099-MISC for Contractors in 2020

For years, businesses used Form 1099-MISC to report calendar-year payments exceeding $600 to individuals who performed business services. These include vendors, independent contractors, freelancers, and consultants.

There has been an important change in the way nonemployee compensation is reported for 2020. The new Form 1099-NEC will be used to report all payments made to nonemployee service providers, while Form 1099-MISC will narrow in scope, retaining its focus on royalties, health care payments, and other business-related payments not made directly to an individual. For years, businesses used Form 1099-MISC to report calendar-year payments exceeding $600 to individuals who performed business services. These include vendors, independent contractors, freelancers, and consultants. Payments to those service providers are now reported on Form 1099-NEC

The other traditional uses of the 1099-MISC are still in effect. When filing electronically, the deadline is January 31 for Form 1099-NEC and March 31 for Form 1099-MISC. The new form presents a few new wrinkles for businesses, but a little planning can go a long way at filing time. Form 1099-NEC effectively pulls out some of the information used to report in Box 7 of the 1099-MISC, and bumps up the deadline for that information. Companies can make things easier by requesting new W-9s from their service providers. Fresh W-9s are a good way to avoid incorrect filings, and the process of requesting them gives companies a chance to identify who needs a 1099-NEC.