IRS Revives Form to Report Nonemployee Compensation

Blog
August 22, 2019

Employers who pay subcontractors nonemployee compensation should be aware of a change coming after 2019. The Internal Revenue Service (IRS) is bringing back a form last used in the early 1980s, 2020 Form 1099-NEC, Nonemployee Compensation. The IRS released a draft version of the form, which will be used to report compensation paid to contractors and freelancers.

Previously, nonemployee compensation was reported on Form 1099-MISC in box 7. Different due dates for Form 1099-MISC caused errors with the IRS’s processing systems that may inadvertently cause a notice to be issued charging late payment fees. Currently, businesses that make payments to a payee of $600 or more in a year are required to file Form 1099-MISC for nonemployee compensation on or before January 31 of the year following the year of payment. However, a payor reporting payments made to an individual other than nonemployee compensation must file the 1099 by March 31 of the year following the year of payment. As a result of these issues, any nonemployee compensation paid beginning in 2020 will be reported on Form 1099-NEC which payors will have to file on or before January 31. The IRS believes that reviving the form should remedy the erroneous notices from the previous process that resulted in the incorrect assessment of late payment fees.

For more information on the new form or other matters related to nonemployee compensation, please contact Anatoli Pilchtchikov or Michael Adam at 301.231.6200.