Beginning with reporting for the 2020 tax year, payments made for non-employee compensation will no longer be reported in box 7 of Form 1099-MISC. Instead, these amounts must be reported in box 1 of Form 1099-NEC.
Generally, the same rules for reporting non-employee compensation as on Form 1099-MISCs in the past apply to the current Form 1099-NEC:
- Payment is made to a non-employee,
- Payment was made for services rendered,
- Payment was made to a non-corporate entity, and
- Payments, during the year, totaled $600 or more
The most common examples of payments that should be included on Form 1099-NEC are:
- Fees paid for professional services, including attorneys (no matter how they are structured i.e. LLC, LP, Corp)
- Commissions to non-employee salespersons
- Fees paid to independent contractors
- Director’s fees to members of the board of directors
The deadline for furnishing Form 1099-NEC to the recipient remains January 31.