New Reporting Requirements for Payments to Independent Contractors.
As everyone looks forward to an end of the relentless change and turmoil of 2020, the IRS is making its own contribution. In an effort for greater clarity, the IRS has created a new form 1099NEC to replace the information you provided last year in Box 7 of form 1099MISC. The IRS has moved up the filing deadling for this form from last year's February 28 to January 31st. Also, there is no longer an option for an automatic 30 day extension. You need to issue a 1099NEC to any non-incorporated independent contractor that you have made payments totalling $600 or more for the year. Also, you need to retain backup withholding for any independent contractor that has not given you a SSN or TIN. In those cases, you will need to issue a 1099NEC even if the total amount paid for the year is less than the $600. This is important given that the IRS can issue substantial penalties for noncompliance.
Be sure to follow this link to the IRS website for additional information:
Keep in mind that everyone's individual situation will be different. These remarks are intended to be nothing more than the start of a converstaion that you should be having with your Licensed CPA or Enrolled Agent long before year end.
Joseph A. Skibinski, CPA | 11/03/2020