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The IRS issued two new forms for the 2020 tax year – Form 1099-NEC and a revised Form 1099-MISC. The newly reintroduced Form 1099-NEC is used to report payments for nonemployee compensation (NEC) that were previously reported on box 7 of Form 1099-MISC.

Background

The IRS reported confusion among taxpayers regarding these deadlines. To alleviate the confusion, the IRS re-issued Form 1099-NEC and revised Form 1099-MISC. The Form 1099-NEC is required to be filed for payors who report nonemployee compensation. The Form 1099-NEC is due on or before February 1, 2021, and there is no automatic extension.

Form 1099-MISC is used to report payments that are not nonemployee compensation. Form 1099-MISC is due on March 1, 2021, if filed by paper, or March 31, 2021, if electronically filed.

The instructions for both the Form 1099-NEC and 1099-MISC are combined and can be found on the IRS website.

What is Form 1099-NEC?

A church must file a Form 1099-NEC if the following four conditions are met:

  1. Payment is made to an individual, partnership, estate, or, in certain cases, a corporation;
  2. Payment is made to someone who is not the payor’s employee;
  3. Payment is made for services in the course of its trade or business (including government agencies and nonprofit organizations); and
  4. Payments made to the payee are in total for the year at least $600.

The Form 1099-NEC is now the appropriate form to report $600 or more in payments for services performed by a nonemployee.

What are the changes to Form 1099-MISC?

As a result of the creation of the new Form 1099-NEC, the IRS revised Form 1099-MISC to rearrange box numbers and add additional boxes. Form 1099-MISC remains the appropriate form to report $600 or more in payments for (among others) rent, prizes, awards, and other income. 

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

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