Differences Between 1099 Misc Form and 1099 Nec Form: Are you in confusion about 1099 MISC form and 1099 NEC form? The major difference between 1099 MISC and 1099 NEC is the payments reported. Miscellaneous income is reported through 1099 MISC form. Non-employee compensation is reported through 1099 NEC Form.
Still you didn’t understand about 1099 Forms? Don’t worry we’ll let you know about the variation between 1099 MISC form and 1099 NEC form. we also provide you information about payments reported through 1099 MISC form and 1099 NEC form, whom to issue 1099 MISC and 1099 NEC form and when to file the Forms.
What is the variation between 1099 MISC and 1099 NEC Form?
The major variations between 1099 MISC Form and 1099 NEC Form is:
Type of the payment
1099 MISC Form is used to report miscellaneous income paid to an independent contractor, self-employed individuals etc. The payments made to an independent contractor are on purpose of business not for personal uses. 1099 MISC Form is one among the series of 1099 Forms and also the most commonly used tax form.
1099 NEC Tax Form is a newly introduced form by the IRS. The taxpayers use 1099 NEC tax form to report any compensation given to non-employees for performing services during the tax year.
The due date to file 1099 MISC Form and 1099 NEC Form with the recipients are on the same date. But the due date to file 1099 MISC Form and 1099 NEC Form with the IRS is different.
What are the payments reported through 1099 MISC Form?
According to the IRS, you should report the following payments in the 2020 tax year through 1099 MISC Form:
$600 or more income
The taxpayer is paying an independent contractor of about $600 or more as: rent, prizes or awards, medical and health insurance, crop insurance proceeds or payments to attorneys etc. File 1099 MISC Form to report all the payments made which exceed $600 for working on course of business or trade.
$10 or more income
If you paid an individual person of at least $10 as royalties, substitute lieu of dividends or tax-exempt interest, then report the payments through 1099 MISC Form in the respective boxes.
1099 MISC Form is also used to report past withholding taxes under backup withholding rules. Mostly an IRS 1099 Form falls under backup withholding taxes, when the taxpayer provides wrong TIN of the payee.
1099 NEC Form reportable payments
Beginning with the 2020 tax year, taxpayers must report non-employee compensation paid to non-employees through 1099 NEC tax Form. The following are the reportable payments through 1099 NEC form:
Payments to non-employee
If you made payments to a non-employee who renders services on course of business or trade, the report the payments through 1099 EC Form to the IRS. You need to consider two things: payment to a non-employee may be an individual, a partnership or an estate and the amount paid must be $600 or more.
Withholding federal or state taxes
1099 NEC Tax Form is used to report federal tax withhold or paid and state taxes withhold and paid. Form 1099 Online NEC Federal tax withholding is due to incorrect TIN of the payee. State tax withholding of 1099 NEC Form is due the amount reporting is greater than the state tax amount.
Some other payments
1099 NEC Tax Form reports some other payments like fees paid to professional services, commissions paid to non-employee sales person, fee splitting, director fees etc.
Whom to issue a 1099 MISC tax form?
Issue 1099 MISC Tax Form to the:
1099 MISC Form is issued by the taxpayer who made payments to the independent contractors of about $600 or more during the tax year. Independent contractors are the individual person who works on course of business or trade but not as an employee. Independent contractors doesn’t enjoy the benefits like an employee but paid compensation for the service performed.
Sole proprietors are the business individuals under which only one person operates business. 1099 MISC Form is issued to the sole proprietors who perform services and treated as a non-employee.
Attorneys are generally law firms. 1099 MISC form is issued to the attorneys when the filer pays $10 or more as gross proceeds. The payments made to attorneys are for providing legal information only. Attorney fees are not included to report through 1099 MISC form.
1099 NEC Form recipients
Recipients of 1099 NEC form includes:
1099 NEC Tax Form reports the payments made to a non-employee only. A non-employee is a person who works for a business or trade but not as a part of employee.
If the taxpayer pays an attorney of $600 or more as fee, commission etc, then issue 1099 NEC Tax Form to the attorney.
When to issue 1099 MISC Forms and 1099 NEC Tax Form?
1099 MISC form is issued by the taxpayers or business individuals to the recipients and to the IRS. The taxpayers of 1099 MISC Form issue the Copy A of the Form to the IRS by March 1st 2021 through paper forms and March 31st 2021 for e-filing. Furnish the copy B of 1099 MISC form to the recipient by February 1st, 2021.
Federal 1099 NEC form is issued to the recipients and to the IRS by February 1st, 2021. The due date to file 1099 NEC Form for paper filing and e-filing is same.
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