It is said that the only certainties in life are death and taxes. The only certainties in local government finance are filings and audits. The beginning of the filing season is January when the Internal Revenue Service (IRS) begins the filing season with 1099 form the needs of W2/W3s and different 1099 forms.
This critical update will equip you to deal with changes in IRS forms, instructions, and rules for 2021 tax reporting on Forms 1099-NEC (Non-Employee Compensation) and 1099-MISC (Miscellaneous Income) (Miscellaneous Information). Though 2020 was a significant year for improvements in 1099 reporting, the IRS has made more adjustments for 2021.
- Due dates for submitting Forms 1099-NEC and 1099-MISC with the IRS and providing statements to payees
- Which forms are eligible for an IRS due date extension?
- The IRS has made modifications to the electronic filing obligation for 1099s.
- A new box has been added to the 2021 Form 1099-NEC.
- What is reportable on the 2021 Form 1099-NEC, Nonemployee Compensation, box by box?
The Redesigned Newly Created 1099 Misc Form
For the 2020 tax year, the IRS amended Form 1099-MISC to enable the establishment of a new Form 1099-NEC. Businesses must deliver Form 1099-MISC to recipients by February 1 of every year, and file it with the IRS by March 1 of that year (March 31 if filing electronically).
There is an exemption to the regular due date for companies who use Forms 1099-MISC to report amounts in box 8, Substitute Payments instead of Dividends or Interest, or box 10, Gross Proceeds Paid to An Attorney.
Latest 1099 NEC Form 2021
There are numerous aspects of the new 1099-NEC form to keep in mind.
- Box 1 is where you enter the monetary value of nonemployee remuneration.
- Box 4 is used to record any amounts withheld to meet backup withholding obligations.
- Boxes 5-7 are used to disclose any withholding from the state.
Form 1099-G for Coronavirus Relief Fund
You must submit Form 1099-G if your city, municipality, or county received monies from the Coronavirus Relief Fund (CRF) under the CARES Act in 2020 and then disbursed the funds to small businesses. According to IRS regulations, distributions of award money over $600.00 are taxable (see 2020 Instructions for Form 1099-G). CRF grant money to a federally recognized Indian tribe member to expand an Indian-owned business on or near a reservation would be the only exemption to the 1099-G requirement.
What Exactly is Non-Employee Compensation?
In the 2020 Instructions for Forms 1099-MISC and 1099-NEC, the IRS defines nonemployee compensation (NEC). If the four requirements listed below are satisfied, you must typically record a payment as NEC.
- You made the payment to someone who is not an employee of yours.
- Also, you paid for services rendered in the course of your trade or company (including government agencies and nonprofit organizations).
- You paid the payment to an individual, partnership, estate, or corporation in some circumstances.
- During the year, you made at least $600 in payments to the payee.
Nonemployee pay examples:
- Fees for professional services, such as attorneys (including companies), accountants, architects, contractors, engineers, and so on.
- Payment for services, including payment for parts or materials needed to perform the services if the provision of the parts or materials was incidental to the provision of the service.
- Fees for directors and other remuneration.
Other Payments in Box 1 of Form 1099-NEC
- Prizes and recognition for non-employee services
- Payments in cash for fish
- Payments for services made by a federal executive agency
- Gross payments for a working interest in oil and gas
- Non-employee Fringe Benefits That Are Taxable
Regardless of the payment amount, you must also submit Form 1099-NEC for each person from whom you withheld any federal income tax (report in box 4) under the backup withholding regulations.
You May Also Like this – What is a 1099 Tax Form, and How Do I Fill It Out?
State Wise 1099 Tax Form
With the IRS Combined Federal/State Filing Program, the IRS has historically transmitted a variety of 1099 form 2021 types, including Form 1099-MISC, to a significant number of states. Filers did not have to file these 1099 forms with the participating states, saving them a significant amount of time and work.
The IRS began forcing firms to submit the new Form 1099-NEC in the tax year 2020. The IRS said in Publication 1220, released on October 26, 2020, that “Form 1099-NEC is not part of the Combined Federal/State Filing (CF/SF) Program.” Individual states began establishing their own state 1099-NEC filing rules in response to that news.
1099-MISC Form Revised
Revised form includes:
- Payer made $5,000 or more indirect sales (checkbox) in box 7.
- Box 9 records Crop insurance on Form 1040.
- Box 10 reports the gross revenues to an attorney.
- The Box 12 reports Section 409A deferrals.
- Box 14 reports nonqualified deferred compensation income.
- Boxes 15, 16, and 17 show the amount of state taxes withheld, the state identification number, and the amount of revenue made in the state, in that order.
In January 2021, businesses began reporting on the new Form 1099-NEC. Companies must record any non-employee compensation payments in box 1 of Form 1099-NEC rather than box 7 of Form 1099-MISC.
I believe this will first make the 1099 process far more complex and time-consuming for the average Main Street firm. However, Most businesses may now submit everything to the IRS by January 31st if they plan ahead of time. Payees will then get only one 1099-MISC form. Furthermore, many smaller vendors and independent contractors will have never seen Form 1099-NEC, adding to the uncertainty.
Anyway, if you still have doubts regarding the 1099 NEC form 2021 or what is a 1099 form – let us know in the comment section. We are always ready to help you.