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Press Release - July, 2019

IRS Preps 1099-NEC for Independent Contractors & Freelancers

Differing due dates have created problems with IRS processing of 1099-MISC forms, so the IRS has decided to look into resurrecting a separate form - the 1099-NEC. The agency has released the draft version of Form 1099-NEC for Nonemployee Compensation as of July 24, 2019.

Currently, Filers report nonemployee compensation - commonly referred to as NEC - on Form 1099-MISC. However, separate reporting deadlines for NEC and non-NEC amounts on Form 1099-MISC has proven challenging. Thus, the IRS has reintroduced Form 1099-NEC as the solution to this dilemma.

When Does the New 1099-NEC Become Effective?
The 1099-NEC is scheduled to become effective in Tax Year 2020 (not for this current tax year). However, as with all IRS draft forms and regulations, this is not yet final as there is still much work to be done in order for this form to be adopted.

The IRS draft instructions for the 1099-NEC are still not publicly posted.

Potential Implications of the 1099-NEC Form
The implications of the new 1099-NEC tax form are far reaching and can be fully analyzed once further IRS instructions & guidance is posted. Some potential implications are below:
  • Existing 1099-MISC - The Box 7, Nonemployee Compensation, and Box 9 checkbox will most likely be removed from the existing 1099-MISC tax form.
  • Payment / Source Systems - May have to be able to separate the 1099-NEC data, from the 1099-MISC, for reporting on the new tax form.
  • State Withholding & Income - Filers will now have to break down the amount of state withholding and income that is solely related to Nonemployee Compensation instead of all the applicable boxes/categories on the 1099-MISC.
  • State Reporting - It is yet to be seen how individual states will react to this new IRS tax form. Many state regulations center around the 1099-MISC and will need to be updated if the nonemployee compensation, and applicable state withholding, is moved to the 1099-NEC.

1099 Pro Support and Integration for the 1099-NEC
The 1099-NEC will be fully supported by the applicable 1099 Pro software and services. Customers can rest easy knowing that the 1099-NEC tax form will be integrated into the 1099 Pro software and Service Bureau for printing, mailing, and e-filing.

Additionally, please continue to follow the 1099 Pro website articles, newsletters, and conferences for continued updates and information regarding the 1099-NEC and other information return reporting updates!

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1099 Pro Press Release - 1099-NEC Article