December 29, 2020 Kyle Sansing

Form 1099-NEC: What Is It?

For those that are not aware, the IRS has announced a new 1099 form for 2020 called the 1099-NEC. RDA has put in place programs (with the latest release) for customers to print and electronically file the new 1099-NEC as well as the 2020 updates to the 1099-MISC.

Customers will find a new field for “Box 1 for 1099-NEC” on the 1099 amounts tab, vouchers labeled throughout the year as “non employee compensation” and “legal” will flow to that. (although this can be manually changed, if needed)

Customers will also see a new print, archive, and file option for the 1099-NEC on the home screen in the 1099 module.

*For municipalities that do not currently use RDA, if your current provider is unable to provide you the ability to print the 1099-NEC form, please contact us. We are able to import 1099 information into RDA from most formats to allow you to print and electronically file your 1099-NEC.

The 1099-NEC 

 

Beginning with tax year 2020, employers must use Form 1099-NEC to report nonemployee compensation. If the following four conditions are met, you must generally report a payment as nonemployee compensation:

 

  1. You made the payment to someone who is not your employee.
  2. You made the payment for services rendered in the course of your trade or business (including government agencies and nonprofit organizations).
  3. You made the payment to an individual, a partnership, an estate or, in some cases, a corporation.
  4. You made payments to the payee of at least $600 during the year.

 

Common examples of nonemployee compensation include payments to independent contractors, fees paid for professional services such as of attorneys and accountants, and commissions paid to nonemployee salespersons that are subject to repayment but not repaid during the calendar year.

 

The 1099-MISC will still be applicable (and available in the software) for some customer situations. 

 

According to the IRS, beginning with tax year 2020, you should file Form 1099-MISC for each person to whom you have paid the following in the course of your business during the year:

  • At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest.
  • At least $600 in the following:
    • Rents.
    • Prizes and awards.
    • Other income payments.
    • Generally, cash from a notional principal contract to an individual, a partnership or an estate.
    • Any fishing boat proceeds.
    • Medical and health care payments.
    • Crop insurance proceeds.
    • Payments to an attorney.
    • Section 409A deferrals.
    • Nonqualified deferred compensation.

 

Please review this link for more information from the IRS on 1099’s

https://www.irs.gov/instructions/i1099msc