IRS revives Form 1099-NEC for nonemployee compensation

The Internal Revenue Service has resurrected a form that hasn’t been used since the early 1980s, Form 1099-NEC, Nonemployee Compensation, with a draft version available for preview on its website.

Since 1983, the IRS has required businesses to instead file Form 1099-MISC for contract workers and freelancers. The revival of Form 1099-NEC is part of an effort mandated by Congress in the PATH Act of 2015 to require businesses to file information returns about any non-employee compensation by Jan. 31 of each year. However, there were problems with the IRS’s processing systems because there was still a March 31 due date for any Form 1099-MISC that didn’t contain non-employee compensation. The draft form is dated 2020, so it would be used for reporting nonemployee compensation in 2020, not for this year.

“To make matters worse, tax analysts reported in March that the IRS computers were unable to apply two different due dates to a batch of Forms 1099-MISC submitted,” wrote Ed Zollars of Kaplan Financial Education in his Current Federal Tax Developments blog. “So a single Form 1099-MISC in a batch submitted after January 31 that had an entry in box 7 for non-employee compensation on it would cause a notice to be issued charging late payment fees on every Form 1099-MISC submitted.”

Zollars noted that the new Form 1099-NEC contains an extra box that wasn’t on the form the last time the IRS released it in 1982 for state identifying information.

Cohn, Michael