The Protecting Americans from Tax Hikes (PATH) Act of 2015, created two separate filing due dates for amounts reported on the same Form 1099-MISC, Miscellaneous Income. Specifically, MISC forms reporting amounts in Box 7 for nonemployee compensation were due by January 31 of the following year, while MISC forms reporting rents, royalties, or other types of income were not due until February 28, if filing by paper, and March 31, if filing electronically. To minimize confusion and administrative burden caused by separate due dates for the same form, the IRS has changed the way nonemployee compensation must be reported on Form 1099 for 2020.
Beginning in 2020, payments made in the course of your trade or business to nonemployees for services rendered totaling $600 or more must now be reported on Form 1099-NEC, Nonemployee Compensation. These payments were previously reported on Form 1099-MISC in Box 7. While the information reported on the new form, and the circumstances that create a filing requirement, have not changed, business owners should be proactive in preparing to meet this new requirement.
Steps to prepare may include requesting IRS Form W-9, Request for Taxpayer Identification Number and Certification, from all vendors paid for services covered under the reporting requirements. Ideally, Form W-9 should be completed by each vendor before issuing any payments to avoid potential backup-withholding requirements. While Form W-9 does not expire, it is important to make sure vendors periodically confirm that the information on the original form has not changed. Changes to a business name, address, or Taxpayer Identification Number (TIN) require a new Form W-9.
Additionally, if you file Forms 1099 on paper forms, make sure that you order the proper forms for 2020 reporting. Forms 1099-MISC will still be available and are required for reporting of other types of payments, but you will not be able to report nonemployee compensation on those forms. If you file Forms 1099 electronically, you should verify that your e-filing system has been updated accordingly.