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Form 1099-NEC: Replacing 1099-MISC Box 7

OnDemand Webinar (114 minutes)

Fully understand the new form 1099-NEC and the new requirements and inputs that go along with it.In July, 2019, the IRS issued a release draft of a new Form 1099 for use commencing in the 2020 tax year (i.e., in 2021), a Form 1099-NEC to replace the Form 1099-MISC, Box 7 and Box 9 for reporting direct sales of $5,000 or more. This new Form 1099-NEC is being implemented in response to problems created by the PATH Act of 2015, when the due date for Form 1099-MISC, Box 7 items were moved to January 31, as compared to other 1099 items, which remained due March 31. In this topic, we will focus on the new Form 1099-NEC, and how to fill it out properly, as well as focus on issues specific to nonemployee compensation that were previously the focus of Box 7 of the Form 1099-MISC. Learn what reconfiguration may be needed of your accounting systems, and ensure that you identify vendors that will now require the two different forms (for e.g., rents and lawn maintenance) and what training and communication will be needed to prevent confusion once the new forms are due to be issued by January 31, 2021. By this date issuers of Form 1099-MISC will need to issue a new Form 1099-NEC that will replace IRS Form 1099-MISC (Box 7) specific to the reporting of nonemployee compensation. The IRS has issued two separate forms, a Form 1099-MISC and a Form 1099-NEC, to allow for the due date of the Form 1099-NEC (January 31) to stand separate from the due date for the Form 1099-MISC (March 31). Issuers need to plan now on how to reconfigure their accounting systems, train and communicate with vendors, using best practices. Those best practices need to include Form W-9 preparation, and addressing backup withholding, and how to avoid penalties. There are hot spots that also need to be addressed, such as how to distinguish employee compensation from nonemployee compensation, addressing Section 530 issues, and spotting when fraudulent forms 1099 are issued implicating Section 7434 claims.

Authors

T. Scott Tufts, Esq., CPLS, P.A.

Agenda

IRS Brings Back IRS Form 1099-NEC

• Use of Form 1099-NEC Prior to 1983

• Use of Form 1099-MISC Box 7 From 1983 to 1999

• PATH Act (2015) and Creation of Different Due Dates for Form 1099-MISC

Understanding the New Form 1099-NEC and Required Inputs

• The Instructions to the New Form 1099-NEC

• Inputting the New Form 1099-NEC Information

• Best Practices - Reconfiguration, Training and Communication

Best Practices - The Form W-9 and Avoiding Backup Withholding

• Obtaining Proper NEC Information Using Form W-9

• Avoiding Backup Withholding Issues

• Penalties and Penalty Avoidance

Identifying the Hot Spots Pertaining to IRS Form 1099-NEC

• Issues Surrounding Employee vs. Nonemployee

• Issues Surrounding Section 530

• Section 7434 and the Fraudulent Form 1099-NEC

• Other Developments