Today is Tax Tip Tuesday. So we’re going to talk about something related to tax, which is going to be very useful in the next month.
Today, we’re going to talk about a brand-new form. It’s called 1099-NEC. And if you’re a business owner who normally has to issue 1099-MISC to independent contractors, or you’re an independent contractor yourself that normally gets a 1099, you’re going to be looking at a new form this year. In case 2020 wasn’t crazy enough already. So this is the new form, 1099-NEC, which stands for non-employee compensation. This form is only going to be used to pay independent contractors. So what the IRS did was instead of making you use the 1099-MISC form that has a whole bunch of boxes and it’s a little bit confusing if you’re not familiar with it, they said, you know what? It’s so common that people are paying non-employees, let’s just make our own form for it.
This is the form. You’ll see that there’s only one box, where it says non-employee compensation. And if you compare that to the 1099 miscellaneous form, there are still so many boxes, but now box seven is no longer for non-employee compensation, so that’s going to be a big change. Something else that is important to note with the 1099-NEC form is that it’s actually going to be used also if you pay attorneys. So if you’ve got legal fees and you’re paying attorneys, and this is just in a business, not personally, if your business is paying attorney’s fees, you’re going to also use the 1099-NEC form.
Now, who do you need to send it to? That hasn’t changed. You still need to send this 1099-NEC form to individuals that work for you. Single-member LLCs. That’s an LLC with one owner. Partnerships. Those are the types of entities that you need to send it to. And obviously, lawyers and law firms. Payments have to be over $600, unless you’re submitting withholding. That’s a little unusual for many people to have to do backup federal tax withholding for their contractors, but sometimes it does happen. So any amount that you pay to them, you have to report the amount and the taxes as well.
And then for all the other things that you might have filed a 1099-MISC for, those you’re still going to use the 1099-MISC form. The most common thing on that really is rent. So if your landlord is an individual, or a single-member LLC, or a partnership, you should be filling out a 1099-MISC form and filling in the appropriate box for rent. These are due at the end of January. So make sure you have your bookkeeping up to date, make sure you have a W-9 for all of your independent contractors. That will let you know A, do they need to be issued a 1099, and B, all the information that you need, like their name, their EIN, or their social security number, and their address, etc. That’s it for your Tax Tip Tuesday. We’ll see you tomorrow.