Beginning with the 2020 tax year, the IRS will require business taxpayers to report amounts paid as nonemployee compensation on the new Form 1099-NEC instead of on Form 1099-MISC as was required in previous years. Generally, businesses will need to use this new Form 1099-NEC if the following conditions are met:
- Payment was for compensation made to somebody who is not an employee
- The payment is for services during the normal course of your trade or business
- The payment is made to an individual, partnership estate or corporation
- The payment total for the year is at least $600.
The non-employee compensation will be reported in box one of the Form 1099-NEC and is generally considered self-employment income and likely subject to self-employment tax to the recipient. Any payments to individuals are that not reported on Form 1099-NEC are likely still reported on form 1099-MISC. Examples of these payments would include items such as prizes, awards, fees and other non-business related services.
For more information, visit the IRS website.