Updates You Must Know: 1099-MISC & 1099-NEC

Written by Allyssa Klingberg on Jan 23, 2021 in IRS Compliance

Before 2020, most churches and nonprofits that hired contracted workers or hosted guest speakers issued 1099-MISC forms.

Now that the IRS has made updates to that form, what can freelancers, churches, and ministries alike anticipate this year?

The IRS has introduced a new Form 1099-NEC used just for reporting independent contractor income, what is officially known as “non-employee compensation.” If you hire contractors, do guest speaking, or contract with nonprofits, this blog is for you!

What is Form 1099-NEC?

As mentioned, the 1099-NEC (preview here) is a relatively new form used specifically to report non-employee compensation. The IRS currently defines this as payments to individuals not on payroll on a contracted basis to complete any such project or assignment. This could include independent contractors, gig workers, or self-employed individuals who previously had any payments to them reported on box 7 of a 1099-MISC form.

1099-NEC vs. 1099-MISC

Although 1099-NEC is now used to report independent contractor income, the 1099-MISC is still around. It is used to report miscellaneous income such as rent or payments to an attorney.

Since both forms are in use, contractor payments in 2020 and beyond will be reported on the new form 1099-NEC. The due date for the 1099-NEC is January 31st of the year following the applicable tax year. As usual, if January 31st does not fall on a business, the due date will be extended to the next business day.

The 1099-MISC is due March 1st if filed by paper and March 31st if filed electronically. Just as with the 1099-NEC deadline, if these dates do not fall on a business day, they will be extended to the next business day.

Who requires a Form 1099-NEC?

If your nonprofit paid a contractor more than $600 in a tax year, they are required to file Form 1099-NEC. This is also true for guest speaking engagements as a minister, so if you did any guest speaking virtually or in-person in 2020, check in with the nonprofits that hosted you!

Tip: If your church or ministry worked with a contractor that was registered as a C corporation or S corporation, a 1099-NEC would not be required! This information can be found on the contractor’s Form W-9.

Employees do not have a 1099-NEC filed for wages, tips, and other compensation paid during a tax year. Instead, a Form W-2 would be submitted to ensure it captures information on taxes paid by both the employee and employer. If you would like more information on the difference between employees vs. contractors, check out our blog on the topic!

Who requires 1099-MISC?

If an individual or LLC was paid at least $600 or more during a year in rent paid, legal settlements, or prize or award winnings by your nonprofit, they are required to file a 1099-MISC.

Who files the Form 1099-NEC?

If your nonprofit hired a contractor and paid them $600 or more in a year, they will need to file a Form 1099-NEC with the IRS and send a copy to the contractor.

How do you file Form 1099-NEC?

You currently cannot download a 1099-NEC form online. You will have to order forms from the IRS website or file online using the IRS FIRE system.

To use the IRS FIRE system, you will need to request a Transmitter Control Code as an employer. You can do this by submitting Form 4419 with the IRS by November 1st of the year before return(s) are due.

What if you want someone else to prepare 1099-NECs for you?

Here at StartCHURCH, we understand your time is valuable. We affirm with you that God has called you to lead a ministry, not handle your ministry’s tax filings. At StartCHURCH, our Tax Team can help you get your tax filings out of the way so you can focus on ministering to the people God has called you to impact. Click the link below to schedule a call with a specialist to learn more about our Tax Services!

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Please feel free to comment. We always appreciate good dialogue. However, we do moderate each comment to ensure that it is on topic and not derogatory to other participants. We ask that you keep your comments brief and pertinent to the topic so that others may benefit.

Blessings,
Raul Rivera


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