Do You Know Which IRS Form to File if You Paid Independent Contractors in 2020? (The Answer May Surprise You!)

Sponsored Post

Form 1099 NECIf you’re a business that relied on independent contractors (ICs) for various services in 2020, you may assume you should file Form 1099-MISC like always. But wait! There’s a new tax form on the block – and you’re going to need to acquaint yourself with it to meet your tax reporting responsibilities.

Beginning with the 2020 tax year, Form 1099-NEC will replace Form 1099-MISC box 7 for reporting non-employee compensation, which includes payments to ICs.

Be Clear on When to Use Form 1099-NEC

To put it simply, the new 1099-NEC performs the exact same function as 1099-MISC box 7. It captures payments of $600 or more to service providers that are either sole proprietors or members of a partnership. Depending on the needs of your business, you may have utilized any number of independent contractors, such as:

  • Graphic designers
  • Web developers
  • Cleaning professionals
  • Freelance writers
  • Landscapers
  • And other self-employed individuals

For these and other ICs, you must distribute the 1099-NEC to recipients by February 1, 2021 (since January 31 falls on a Sunday). This is also the date you must file these forms with the IRS – whether you are filing via paper or electronically.

What About Form 1099-MISC?

Because you’ll no longer use a 1099-MISC to report independent contractor payments, you may wonder if this form serves any purpose. The 1099-MISC remains, but in a different capacity. Generally speaking, you should file a Form 1099-MISC for anyone you paid at least $10 in royalties or $600 in rent, prizes and awards in the previous year.

Tips to Ease the Tax-Filing Process

To help you with your upcoming filing, consider these do’s and don’ts:

  • DO make sure you have a Form W-9 on file for each contractor before completing Form 1099-NEC.
  • DO verify that the taxpayer ID is correct for each independent contractor.
  • DON’T use Form 1099-NEC to report personal payments.
  • DON’T use Form 1099-NEC to report employee wages (use the W-2 instead).

Insight and Expert Online Filing

Want to learn more about the differences between the new 1099-NEC and the 1099-MISC? Check out the details here. And when you’re ready to file your 1099s this tax season, turn to efile4Biz for an effective, affordable solution. It’s free to try!

By Jaime Lizotte, Tax & HR Compliance Solutions Manager, ComplyRight

Image: Depositphotos.com

This article, "Do You Know Which IRS Form to File if You Paid Independent Contractors in 2020? (The Answer May Surprise You!)" was first published on Small Business Trends



via Small Business Trends Business Feeds

0 nhận xét:

Post a Comment