IRS Debuts Draft of 1099-NEC for 2020

Gerry Nelligan
July 25, 2019

In a monumental moment for tax reporting professionals, the IRS has released a draft of Form 1099-NEC, the form that will eventually replace Form 1099-MISC box 7 for reporting nonemployee compensation and box 9 for reporting direct sales of $5,000 or more. 

The NEC should alleviate confusion that resulted after the passage of the PATH Act in 2015. The PATH Act brought due dates for reporting Form 1099-MISC box 7 from March 31 to Jan. 31. However, the due date for non-box 7 Forms 1099-MISC remained March 31, effectively creating two different due dates for the same form. 

1099-NEC to replace 1099-MISC box 7 

The NEC would replace Form 1099-MISC box 7 altogether as the new form for reporting nonemployee compensation, likely leaving the Form 1099-MISC as the form for reporting other types of compensation, although the IRS has not yet released a draft of the new version of Form 1099-MISC. 

As such, the deadline for reporting Form 1099-NEC would likely be Jan. 31, and the deadline for Form 1099-MISC would remain March 31. The first due date for each would occur in 2021.

IRS responds to concerns about 1099-MISC

The new form should help payers avoid fines and penalties for late reporting. As regulations stand now, any late box 7 original forms filed with non-box 7 forms could cause the IRS to count all non-box 7 forms as late, even if they were filed on time. For example:

  1. A filer sends box 7 original forms to the IRS by Jan. 31, meeting the deadline.
  2. Some late box 7 originals trickle in after Jan. 31.
  3. The filer sends non-box 7 forms by March 31, meeting the non-box 7 deadline.
  4. In the same batch as the non-box 7 forms, the filer sends late box 7 forms.

Step 4 causes the problem. Because late box 7 forms arrive with non-box 7 forms, all forms—including non-box 7 forms sent on time—could be considered late and subject to penalties. The 1099-NEC should eliminate that confusion by separating the forms entirely, indicating a response by the IRS to concerns from filers in the wake of the PATH Act.  

Find the most updated information on Form 1099-NEC here.

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Gerry Nelligan

Gerry Nelligan is a Regulatory Analysis Supervisor at Sovos, leading a team of counsels covering information reporting, including 10-Series IRS reporting, Affordable Care Act (ACA) reporting and Automatic Exchange of Information (AEOI). Gerry received his J.D. from Suffolk University Law School and his B.A. from Providence College. He is a licensed attorney in the state of Massachusetts.
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