Form 1099-NEC & Direct to State Reporting

Tax and accounting professionals managing 1099 reporting will need help this tax season. Here’s why.

New 1099 Form

In 2020 1099-NEC was resurrected to replace box seven on Form 1099-MISC. This means the 1099-NEC is the new form for reporting nonemployee compensation for services amounting to $600 or more. As a result, this form has a significant impact on all types of businesses and their 1099-MISC reporting processes.

New Reporting Requirements for Federal & State

The IRS announcement in Publication 1220 added Form 1099-NEC to be included in the Combined Federal/State Filing (CF/SF) program. It will be up to the state agencies whether or not to make a change to participate in CF/SF and not continue to require direct reporting. This means businesses will need to:

  • Track individual state guidance for the 1099-NEC that will continue to change late in the season
  • Understand state-specific requirements around data, reporting thresholds, format, timelines and adapting reporting processes for each state