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IRS clarifies nonemployee compensation reporting

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Tax Hot Topics newsletter The IRS provided on its website that business taxpayers who pay or receive nonemployee compensation (NEC) are required to file the reinstated Form 1099-NEC, Nonemployee Compensation, pursuant to the related instructions.

Starting in tax year 2020, payers must complete this form to report any payment of $600 or more to a payee. Form 1099-NEC is used to report payments made for services performed by someone who is not an employee, cash payments for fish, and withholding of federal income tax under the backup withholding rules. Such information was previously reported on Form 1099-MISC. However, payments with respect to deceased employees continue to be reported on Form 1099-MISC (accrued wages, vacations and other compensation paid in the same year the employee died must also be reported on Form W-2 for Social Security and Medicare tax purposes).

Generally, payers must file Form 1099-NEC by Jan. 31. For 2020 tax returns, the due date is Feb. 1, 2021, because Jan. 31, 2021, falls on a Sunday. There is no automatic 30-day extension to file Form 1099-NEC. However, an extension to file may be available under certain hardship conditions.

Contacts:
Jeff Martin
Partner
Washington National Tax Office
T +1 202 521 1526

Keith Mong
Managing Director
Washington National Tax Office
+1 202 521 1554

James Sanchez
Senior Associate
Washington National Tax Office
+1 202 861 4107

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