IRS Issues New 1099 Forms for 2020

Effective for the 2020 tax year, the IRS has created a new form – the 1099-NEC -to report “Non-Employee Compensation” that was historically reported on the form 1099-MISC.  Previously the IRS had required most income provided to individuals, partnerships, and law firms or attorneys that were not wages to be reported on the Form 1099-MISC.  This new form requires reporting amounts paid for compensation related items not paid to employees, e.g., subcontractors and attorneys, are now to be reported on the form 1099-NEC. 

The change also updates Box 7 of the 1099-MISC to remove the former Non-Employee Compensation and replaces it with “Payer made direct sales of $5,000 or more”.  There is no dollar amount that will now be reported on the 1099-MISC box 7. 

It’s also important to note that any gross proceeds paid to attorneys or law firms in connection with a legal settlement and not for the attorneys’ services should still be reported on Form 1099-MISC, Box 10.  Payments to an attorney or law firms for services provided should be reported on Form 1099-NEC. 

If questions arise when you’re getting ready to prepare your 2020 1099 forms as to which forms to utilize or where to report specific payments, feel free to reach out to a Schneider Downs Tax Team member for assistance.