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What's new for tax year 2020?
The IRS has separated nonemployee compensation onto a new form called the 1099-NEC for tax year 2020. Because of this, the IRS has revised Form 1099-MISC and rearranged box numbers for reporting certain income.
What forms or boxes do I choose?
If you filed 1099-MISC with only Box 7 in the past you should most likely choose Box 1 - Nonemployee Compensation on the 1099-NEC. This is the most common situation and the only box most businesses will need to select for payment types. If you have other payment types, you'll need to file both forms.
For your convenience, we’ve summarized below some of what the IRS has to say about each of the choices. If you’re not sure what payment types you might have made to contractors this year, review the IRS’s instructions for Forms 1099-MISC and 1099-NEC, or consult your accountant.
Nonemployee compensation (Box 1)
Most businesses will choose this box. Enter nonemployee compensation (NEC) of $600 or more. Include fees, commissions, prizes and awards for services performed as a nonemployee, other forms of compensation for services performed for your trade or business by an individual who is not your employee, and fish purchases for cash. Include oil and gas payments for a working interest, whether or not services are performed. Also include expenses incurred for the use of an entertainment facility that you treat as compensation to a nonemployee. Federal executive agencies that make payments to vendors for services, including payments to corporations, must report the payments in this box. See Rev. Rul. 2003-66.
For more specific information on what qualifies, please see page 10 and 11 of the Instructions for Forms 1099-MISC and 1099-NEC
Federal tax withheld on nonemployee compensation (Box 4)
Enter backup withholding. For example, persons who have not furnished their TINs to you are subject to withholding on payments required to be reported in box 1. For more information on backup withholding, including the rate, see part N in the 2020 General Instructions for Certain Information Returns.
Rents (Box 1)
Enter amounts of $600 or more for all types of rents, such as any of the following.
For more specific information on what qualifies, please see page 4 and 5 of the Instructions for Forms 1099-MISC and 1099-NEC
Other Income (Box 3)
Enter other income of $600 or more required to be reported on Form 1099-MISC that is not reportable in one of the other boxes on the form.
For more specific information on what qualifies, please see page 5 and page 6 of the Instructions for Forms 1099-MISC and 1099-NEC
Gross Proceeds Paid to an Attorney (Box 10)
Enter gross proceeds of $600 or more paid to an attorney in connection with legal services (regardless of whether the services are performed for the payer). See Payments to attorneys, earlier.
For more specific information on what qualifies, please see page 2 and 3 of the Instructions for Forms 1099-MISC and 1099-NEC
Fishing Boat Proceeds (Box 5)
Enter the individual's share of all proceeds from the sale of a catch or the FMV of a distribution in kind to each crew member of fishing boats with normally fewer than 10 crew members. A fishing boat has normally fewer than 10 crew members if the average size of the operating crew was fewer than 10 on trips during the preceding 4 calendar quarters.
For more specific information on what qualifies, please see page 6 of the Instructions for Forms 1099-MISC and 1099-NEC.
Medical Payments (Box 6)
Enter payments of $600 or more made in the course of your trade or business to each physician or other vendor or provider of medical or health care services. Include payments made by medical and health care insurers under health, accident, and sickness insurance programs. If payment is made to a corporation, list the corporation as the recipient rather than the individual providing the services. Payments to persons providing health care services often include charges for injections, drugs, dentures, and similar items. In these cases, the entire payment is subject to information reporting. You are not required to report payments to pharmacies for prescription drugs
For more specific information on what qualifies, please see page 6 of the Instructions for Forms 1099-MISC and 1099-NEC
Direct Sales (Box 7)
Enter an “X” in the checkbox for sales by you of $5,000 or more of consumer products to a person 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. Do not enter a dollar amount in this box. The report you must give to the recipient for these direct sales need not be made on the official form. It may be in the form of a letter showing this information along with commissions, prizes, awards, etc.
Substitute Payments in lieu of dividends or interest (Box 8)
Enter aggregate payments of at least $10 of substitute payments received by a broker for a customer in lieu of dividends or tax-exempt interest as a result of a loan of a customer's securities. Substitute payment means a payment in lieu of (a) a dividend, or (b) tax-exempt interest to the extent that interest (including original issue discount) has accrued while the securities were on loan. For this purpose, a customer includes an individual, trust, estate, partnership, association, company, or corporation.
Crop Insurance Proceeds (Box 9)
Enter crop insurance proceeds of $600 or more paid to farmers by insurance companies unless the farmer has informed the insurance company that expenses have been capitalized under section 278, 263A, or 447 of Instructions for Forms 1099-MISC and 1099-NEC.
Excess Golden Parachute (Box 13)
Enter any excess golden parachute payments. An excess parachute payment is the amount over the base amount (the average annual compensation for services includible in the individual's gross income over the most recent 5 tax years). Find additional detail on page 11 of the Instructions for Forms 1099-MISC and 1099-NEC.
Federal tax withheld (Box 4) Enter backup withholding. For example, persons who have not furnished their TINs to you are subject to withholding on payments required to be reported in box 1. For more information on backup withholding, including the rate, see Instructions for Forms 1099-MISC and 1099-NEC
Thanks to our friends at Intuit for this helpful summary.