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:
- A filer sends box 7 original forms to the IRS by Jan. 31, meeting the deadline.
- Some late box 7 originals trickle in after Jan. 31.
- The filer sends non-box 7 forms by March 31, meeting the non-box 7 deadline.
- 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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