Understanding IRS Form 1099-NEC and Form 1099-MISC and Best Practices
1 hour 40 minutes
Ensure you are prepared for the big changes the IRS is making to Form 1099 reporting requirements.
In July 2019, the IRS issued a release draft of a new Form 1099 for use commencing in the 2020 tax year (i.e., in 2021), a Form 1099-NEC to replace the Form 1099-MISC, Box 7 and Box 9 for reporting direct sales of $5,000 or more. This means that commencing in 2021, when reporting with regard to the 2020 calendar year, there are now two (2) different forms to consider (Form 1099-MISC and Form 1099-NEC), as opposed to one. In this topic, we will focus on the new forms and how to fill them out properly, with an emphasis on some of the confusion that exists. Boxes 3 and 7 of the Form 1099-MISC form, as well as knowing what items go on which form will be discussed. Learn what reconfiguration may be needed of your accounting systems and ensure that you identify vendors that will now require the two different forms (e.g., rents and lawn maintenance) and what training and communication will be needed to prevent confusion. Issuers need to plan now to reconfigure their accounting systems and train vendors using best practices. Those best practices need to include how to prepare Form W-9, address backup withholding, and avoid penalties. There are hot spots that also need to be addressed, such as how to distinguish employee compensation from nonemployee compensation, addressing Section 530 issues, and spot when fraudulent forms 1099 are issued implicating Section 7434 claims. Many accounts payable and accounting departments struggle with correctly completing Form 1099-MISC. They often do not know how to issue a 1099-MISC to disregarded entities or how to report special payments such as legal settlements or payments made after the death of an employee. Payable departments often miss deadlines when responding to IRS B notices which can result in penalties. This material will help those responsible for issuing these forms to collect the pertinent information to complete a correct 1099-MISC or 1099-NEC form. Information covered includes new issues for reporting, ways to report to disregarded entities and medical payments, legal settlements, and the proper reporting for payments made after the death of an employee. Failing to properly complete and file these forms is a common issue that exists for all payers, both for-profit and not-for-profit entities. The result of issuing incorrect forms is often penalties imposed on the payer. This information will help payers avoid penalties as well as limit the number of corrected forms they will have to prepare.
• You will be able to review why the IRS brought back Form 1099-NEC.
• You will be able to explain how to input the new Form 1099-NEC information.
• You will be able to discuss the new Form 1099-MISC and required inputs.
• You will be able to identify when the 1099-MISC forms are due to the recipients and the IRS.