Changes to Form 1099-MISC For 2020-2021

Some hefty changes have been made to the 1099 forms by the IRS for 2020-2021.

2020 is coming to an end in less than 40 days. Businesses around the country are gearing up for the tax season starting with the new year in 2021. In light of the Covid-19 pandemic (which continues to restrain a lot of businesses), many hope for 2021 to be a much more positive and successful year, both personally and financially.  

Planning on having a stress-free new year and 2021? Then we recommend that you check out the guidelines and updates that the IRS has enforced on 1099 forms and be prepared for a calmer and positive (hopefully) 2021. 

So, let’s have a quick rundown on all the major and minor changes enforced by the IRS on the 1099-MISC and related forms for the year 2020-2021.

Changes to ‘Non-Employee Compensation’ Payments

Previously, all ‘Non-Employee Compensation’ payments were reported to recipients and the IRS in form 1099-MISC, Box 7.

What’s New In 2020 Tax Season?

‘Non-Employee Compensation’ will now include a new form. The 1099-NEC form has been created to separate the 1099-MISC, Box 7 forms.

What You Need to Do

All you have to do is use the new form 1099-NEC for ‘Non-Employee Compensation’ and the revised 1099-MISC form when filing other types of “Miscellaneous Income” to the IRS. 

Changes to 1099-MISC, Box 7

Previously, all the ‘Non-Employee Compensation’ amounts ($600 or greater) were supposed to be reported on 1099-MISC, Box7, and other “Miscellaneous Income” reported using other boxes on Form 1099-MISC.

What’s New?

Now, all the ‘Non-Employee Compensation’ amounts ($600 or greater) that you previously entered in 1099-MISC, Box7 should be reported on 1099-NEC, Box 1.

What You Need to Do

All you need to do is ensure that you use Box 1 in the 1099-NEC form to report all the amounts ($600 or greater). 

As a responsible business, ensure that these forms are mailed to the recipients and the IRS on or before the 31st of January 2021. Luckily, 31st January 2021 is a Sunday, so you can mail it on or by 1st of February 2021 (Monday). 

Other Amounts on 1099-MISC that Need to Be Reported in New Boxes

All the other amounts (at least $600) should be reported in a new box as specified below. 

  • Rents – Box 1
  • Prizes and awards – Box 3
  • Other income payments – Box 3
  • Generally, the cash paid from a notional principal contract to an individual, partnership, or estate – Box 3
  • Fishing boat proceeds – Box 5
  • Medical and health care payments – Box 6
  • Crop insurance proceeds – Box 9
  • Payments to an attorney -Box 10 
  • Section 409A deferrals – Box 12
  • Non-qualified deferred compensation – Box 14

Pay Attention to 1099-MISC Due Dates 2020

Please note that 1099-NEC is due to recipients and the IRS (postmarked by or on) 31st January 2021.

All 1099-NEC forms must be submitted to the IRS by 1st February. However, depending on the type of transaction, the recipient’s due date will vary. 

More information is available on the official website of the IRS here.

Special Focus on the Healthcare Industry  

You may be aware that Form 1099 and W-9 audits are being conducted more aggressively in states like California, New York, and New Jersey as some businesses especially the ones in the healthcare industry are misclassifying their employed workers as independent contractors and vendors. 

Intentional or unintentional, such misclassifications are on the radar because employees that are being misclassified as independent contractors are being deprived of certain rights and benefits promised to regular employees.  It’s best to comply with the IRS and avoid consequences and serious escalations in the near future.

To the Businesses that Are in a Hurry

As fellow business professionals, we understand that tax season can be a stressful time. However, complying with these changes would only benefit your business in the long run, and helps your business be in the good books of the IRS. 

Additionally, not complying with these changes would result in a back-and-forth with the IRS, more stress, and exhausting your resources.

How to Adapt to These 1099 Changes 

While small and medium scale businesses may find it easy to adapt to these changes, large firms and companies might need some extra help. Regardless of the size or type of your business, it is time that you start looking at other options to help you file your forms individually or in bulk – online. This way, filing your 1099 MISC, 1099-NEC, and other forms is no longer stressful, but a breeze.

More than 138,217,000 individuals and businesses have e-filed their tax forms in 2019 alone.

Automate Your 1099 e-Filing This Tax Season

If you have a higher number of employees and finding it hard to adapt to these new updates and changes announced by the IRS, we suggest that you e-file your forms with a reliable and convenient platform, such as Tax1099

Tax1099 is a dynamic e-filing platform integrated with powerful accounting and data management tools, including but not limited to Xero, Bill.com, QuickBooks, FreshBooks, Zoho, and more.

It’s an IRS-approved e-filing platform and adapts well with every business size and type. Tax1099 is vouched by leading business news companies, such as Forbes, Inc, and more. 

All the 1099-MISC, 1099-NEC, and other forms are state and federally compliant. You can learn more about the salient features of Tax1099 such as easy bulk filing, API integrations, and more.

Bonus Tip

e-File 1099 forms online and cut down the hours and days you put into gathering your paperwork and validating the information by at least 50%. Alternatively, if you’re filing by mail, don’t forget to postmark it and submit it to the IRS before the due dates as specified above. 

Did you find the needed 1099-MISC instructions for 2020? If you did not find what you were looking for, we would recommend checking for more useful information on the official portal of the IRS here 

Do you think we missed out on something that should on this blog? Comment below and our team will address them. 

If you have any questions regarding Tax1099, such as “How to file 1099-MISC” or “1099-MISC instructions 2020”, feel free to check out Tax1099.com and drop your queries in the comment section below. 

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