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Small Business Resources

Business Basics -
The New 1099

In 2020, businesses will begin using a new 1099 form to report income for independent contractors and any other person that your business or organization paid $600 or more during the tax year. The 1099-NEC (Non-Employee Compensation) will now be used for the information that was previously reported in Box 7 on the 1099-MISC. The 1099-NEC must be provided to the recipient and the IRS by February 1, 2021.

Businesses and organizations generally should report payments on a 1099-NEC if a payment was for someone that is not an employee, it was for services performed for the business or organization, it was a payment to an individual, partnership, estate, or in some cases, a corporation, and the payment was at least $600 during the year.

Payments that should be included on a 1099-NEC include:

  • Payments for professional services fees, such as accountants, architects, contractors, and attorneys (see below)

  • Payments to independent contractors

  • Payments to nonemployee entertainers for services

This does not include:

  • Payments to corporations (including a limited liability company that is treated as an S or  corporation) except for attorneys’ fees

  • Payments for merchandise, telegrams, telephone, freight, storage, and similar items

  • Payments to a tax-exempt organization

  • Payments to governmental entities

Payments that should still be included on the 1099-MISC include:

  • Payments of $10 or more in royalties or broker payments in lieu of dividends or tax-exempt interest

  • Payments of at least $600 in

    • Rent

    • Prizes and awards

    • Other income payments (for example, Per Capita Distributions)

    • Cash paid from a notional principal contract to an individual, partnership or estate

    • Any fishing boat proceeds

    • Medical and health care payments

    • Crop insurance proceeds

    • Payments to an attorney (see below)

    • Section 409A deferrals

    • Nonqualified deferred compensation

(For more information, visit https://www.irs.gov/forms-pubs/about-form-1099-misc)

Attorney’s fees should be included on the 1099-NEC if the attorney (which includes a law firm or other provider of legal services) is paid $600 or more for their services. However, if an attorney was paid $600 or more in connection with their legal services, such as a settlement agreement, the gross proceeds should be reported on the 1099-MISC. This applies even if the attorney, law firm or legal service provider is a corporation and was paid for their legal services.

For more information on the 1099-NEC and 1099-MISC, check out the IRS website at https://www.irs.gov/instructions/i1099msc.

Please note, this information on this website does not constitute legal advice. It is provided for general information purposes only.