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Q:
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When should I use the Form 1099-MISC?
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A:
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Form 1099-MISC, Miscellaneous Income, is an information return that businesses use to report payments (e.g., rents and royalties) to nonemployees. Each payer must complete the Form 1099-MISC and send the copy of the Form by January 31 if during the tax year the payer pays $600 or more to a recipient. And the recipient should report all earnings on the tax return.
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Q:
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When should I use the new Form 1099-NEC?
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A:
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Businesses would need to use Form 1099-ENC if you made payments totaling $600 or more to a nonemployee. Form 1099-NEC is not a replacement for Form 1099-MISC. Form 1099-NEC, Nonemployee Compensation, is a form that solely reports nonemployee compensation. Form 1099-NEC is only replacing the use of Form 1099-MISC for reporting independent contractor payments. Prior to 2020, you would include nonemployee compensation in Box 7 on Form 1099-MISC.
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Q:
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What is the definition of the nonemployment compensation?
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A:
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If the following four conditions are met, a payment is classified as a nonemployee compensation and required to be reported on Form 1099-NEC.
1.
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The payment is made to someone who is not your employee;
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2.
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The payment is made for services in the course of your trade or business (including government agencies and nonprofit organizations);
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3.
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The payment is made to an individual, partnership, estate, or in some cases, a corporation; and
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4.
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The payment is made to the payee of at least $600 during the year.
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Q:
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What information should I report on the Form 1099-ENC?
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A:
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You should include the following information on the Form 1099-NEC: Your name, address, and phone number; Your TIN (Taxpayer Identification Number); Recipient’s name, address, and TIN; Total nonemployee compensation; Federal and state income tax withheld (if applicable).
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Q:
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Where should I distribute the copies of Form 1099-ENC?
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A:
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Please make sure to distribute the following copy to the right recipient before the deadline to avoid penalty:
Copy A: The IRS (by January 31)
Copy 1: State tax department, if applicable
Copy B: Independent contractor (by January 31)
Copy 2: Independent contractor (by January 31)
Copy C: Keep in your business records.
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FAQ
