WHY THE 1099 NEC FORM RESTORED BACK BY THE IRS? Are you thinking to report your non employee compensation to the IRS? Confused to choose the form i.e. 1099 MISC or 1099 NEC? Since you are reporting the non-employee compensation, choose the new tax form 1099. Here we’ll let u know about the new tax form 1099 for reporting non-employee payments, what is the reason behind the restore of old 1099 NEC form in the 2021 tax year and payments reportable on new IRS Form 1099.
What is the New 1099-NEC Tax Form?
The new tax form “1099 NEC” is used to report non employee compensation to the IRS. Particularly, this tax form was reintroduced by the IRS in the tax year 2021. Generally, this form only reports payments which are paid to an individual contractor annually of about $600 or more.
The 1099 Non-employee Compensation form was restored back from the old form which was used in the year 1982. This form replaces 1099 MISC box 7.
What is the Reason Behind the Restore of the Old 1099?
The two main reasons to restore the Federal Tax 1099-NEC Form are:
- To clear the confusion created by the 1099 MISC Form.
- To provide time to the IRS to re-check the submitted forms.
When Payers had to Choose 1099 NEC Form?
1099 MISC reports non employee compensation in the box7. Particularly, this form reports all the miscellaneous income annually. Before the PATH Act, the taxpayers used IRS 1099 MISC Form to report non-employee compensation also miscellaneous income by the end of February 31st. The due date for reporting non-employee compensation changed to January 31st in the year 2015 by the PATH act.
This change in the due date created confusion to the tax payers and also to the IRS. Due to dual filing dates the IRS imposed penalties on the tax payers considering the form as late return. Due to these reasons IRS restored the 1099 Tax Form for reporting non-employee payments in the tax year 2021.
When Did You Need to File 1099 Tax Form?
Yes, you need to file 1099 NEC Forn to report the payments paid to an individual person annually to the IRS. Below points will give you clear information about the reportable conditions of the IRS 1099 Form 2021:
- Paying an individual contractor or a person annually.
- The individual person whom you are paying works for your business or trade.
- The amount of the payment exceeds $600 annually.
Following Payments are Report through NEC Form
- Non-employee payments of about $600 annually.
- Withholding any federal income tax under backup withholding rules.
- Withholding of state income tax.
- Fees to attorney’s.
Instructions of filing the form 1099 NEC:
- Issue the recipient copy of the form 1099 by January 31st.
- E-File the 1099 NEC Form by the end of January 31st.
- If necessary, issue the state copy by January 31st.
- Ask the payee to file the W-9 form to fill out the 1099 Form easily.
- Enter the details provided in the form 1099 correctly, otherwise the form may reject by the IRS.
- The compensation amount entered must be correct.
Do you need to file 1099 For reporting less than $600?
No. There is no need to file Form 1099 NEC, as you are paying a non employee of about $450 which is less than $600. Below are few of the payments that are not reportable:
- Compensations less than $600.
- Payments made to corporations.
- Merchandise, phone or similar item payments.
- Tax-exempt trust payments.
How Can I Request a 30 Days extension to File 1099 Form?
There is no automatic 30 days extension to file form 1099 NEC. Particularly, the IRS grants a 30 days extension only for specific reason. The request must submit on paper. Requesting extension is listed on line 7 of the form 1099.
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