“1099” is now officially obsolete.
Starting with the 2021 tax year, the IRS income-reporting form that clients use to confirm the amount they paid contractors is being replaced by the “1099-NEC.”
Ever gracious, the IRS has granted a whole extra day for organizations to produce the new form, which means that you might get yours from some clients as late as February 1, 2021.
From what accounting experts are saying, the basic function of the two forms appears to be the same (note that I’m not an accountant and don’t play one on TV; please see the links below to the IRS website and always check with a financial professional to complete your taxes, there the caveats are done can I breathe now?):
Like the 1099, the 1099-NEC and the accompanying 1099-MISC are still required for organizations to confirm to contractors how much they were paid, total, for the past year. Every contractor gets one, if they were paid over $600 in the tax year. If you are getting paid by a client who has not required you to complete a 1099 before starting payment, your client has big problems that are outside the scope of this blog post and you might want to ask about that.
The information requested appears to be basically the same, but the new form is designed differently and appears to label some of the information differently.
Taxpayers who chronically mess up their taxpayer identification number (TIN) get flagged, for what purpose remains to be seen.
And other fiddly changes basically mean you must be very careful about cutting and pasting information from one form to the other.
What does this means for those of us who just want to get paid on time and accurately, and pay our taxes in such a way that we won’t get fined or be sent to jail?
As someone who’s been paying taxes since the 1970’s, I’d say that it would be time well spent to gather all your current client information and figure out who will need an new 1099-NEC form from you. Check with your tax preparer to see when you can update to the new form and get that chore done proactively. First, this builds goodwill with the accounts payable staff at your clients, which is always handy when you have to ask them annoying questions. Second, ask your tax preparer if your situation invokes any other 1099-NEC transition complications, so you can gather paperwork in advance and budget for extra time with your tax advisor.
Cynics (not me), take cheer: the new form and all the attendant complications, confusions and clogs, complies with the Paperwork Reduction Act.
Sources and further reading:
https://www.irs.gov/instructions/i1099msc
https://www.irs.gov/individuals/international-taxpayers/taxpayer-identification-numbers-tin