It’s late September and time to plan for 1099 reporting for 2021. That means checking your vendor master for missing taxpayer-identification numbers and classifications and formulating a plan to collect and verify them by the end of the year.
It also means preparing for this year’s form changes. Last year saw changes to the 1099-MISC along with the re-introduction of form 1099-NEC to report non-employee compensation. This year’s changes may be minor by comparison. Nevertheless, it’s possible to get confused by the changes, and you need to get them right. So here they are.
Remember, now non-employee compensation payments are reported on the 1099-NEC. But last year payments made under section 6050R of the tax code, which addresses payments for fish to an individual “in the trade of catching fish,” were reported on the 1099-NEC Box 1. This year, you won’t report those payments on the 1099-NEC but the 1099-MISC in Box 11. Box 1 of the 1099-NEC is for reporting non-employee compensation, excluding 6050R payments.
Also, if you made sales valued at $5,000 or more for resale to a person you can report it on the 1099-NEC. Mark an “X” in Box 2 on the 1099-NEC. The sales here refer to selling to someone “on a buy-sell, deposit-commission, or other commission basis for resale (by the buyer or any other person) anywhere other than in a permanent retail establishment.” Note, however, that you may instead report such sales on the 1099-MISC, marking a “X” in Box 7.
Remember that a 1099-NEC must be filed with the IRS by January 31st. However, the 1099-MISC is not due until February 28th if on paper and March 31st if filed electronically. So, unless you also have non-employee compensation to report for that same individual or entity to whom you made sales of $5,000 or more, you have more time to file by reporting the sales on the 1099-MISC. The other notable change to the 1099-NEC, for paper filers, is that the IRS has compressed the form so that three of them fit on a single page instead of two like last year.
Box 11 on the 1099-MISC, which was “reserved” last year, is now to be used for reporting payments made under section 6050R, cash payments you make for fish for resale. Also, as noted above, filers can use Box 7 to indicate sales made to a reseller.
Note that gross proceeds paid to an attorney, such as a settlement, goes in Box 10 of the 1099-MISC. But payment of fees to your attorney for services rendered to your organization goes in Box 1 of the 1099-NEC.
The other change to the 1099-MISC form is the title. It’s still a 1099-MISC, but “MISC” now stands for “Miscellaneous Information Tax Form” instead of “Miscellaneous Income Form.” Again, that change does not affect any reporting requirements, such as thresholds or due dates.