Recently the IRS determined that the 1099-MISC that has been in use since 1982 will be modified and the 1099-NEC will be added to report non-employee compensation for the 2020 tax year. The new 1099-NEC will capture any payments to non-employee service providers, including independent contractors, freelancers, vendors, consultants and other self-employed individuals commonly referred to as 1099 workers.
According to the IRS, a combination of these four conditions distinguishes a reportable payment that should use the new 1099-NEC form, rather than the Box 7 field of the 1099-MISC previously used:
Why is the 1099-NEC replacing the use of Box 7 on the 1099-MISC? In December 2015 the Protecting Americans from Tax Hikes Act (the PATH Act) created a unique situation for tax filers. It caused some confusion about the misaligned January or February deadline for Form 1099-MISC containing data in Box 7, and potential late filing fees and fraud.
The overall process for reporting non-employee compensation is changing for the 2020 tax year as a result, the new 1099-NEC is part of the update.
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