Below is a more detailed overview of the items included on Form 1099-NEC.
Attorney’s Fees: Box 10 reports payments to an attorney or law firm, including corporations. Form 1099-NEC should be used for attorney’s fees, and Form 1099-MISC should be used for settlements of lawsuits, etc.
Awards: Box 3 of Form 1099-MISC is reserved for awards and prizes, including cash and merchandise. A form will be issued for any winnings over $600, but does not include gambling profits.
Healthcare: In field 6, indicate payments
that your company has made to health care providers, health insurance companies, physicians, suppliers, etc. Payments to pharmacies for prescription drugs do not have to be reported.
Did you know? Payments to corporations are generally not reported. However, if the corporation to which you made the payment provides health or wellness services, you must report all payments.
Royalties: Royalties must be reported in box 2 for any amount of $10 or more in a calendar year. Royalties include copyrights, patents, oil, gas, etc.
Rent: Rent must be added in Mexico Telegram Data box 1 of Form 1099-MISC.
Differences between 1099-MISC and 1099-NEC
As of 2020, Form 1099-NEC is for all independent contractor income. Form 1099-MISC is still valid. However, it is reserved for payments that go beyond the contractor or freelancer’s wages, such as rent or attorney fees.
Tip: The only business use for Form 1099-NEC is to report compensation to non-employees. If you need to account for payments to third parties, such as Technology and Marketing Leadership Review: Explore Awards, Prizes, Rents, and Royalties, you should use Form 1099-MISC.
The due dates for filing the forms also vary. For example, Form 1099-NEC is due January 31, while Form 1099-MISC is due March 1 if filed on paper and March 31 if filed electronically.
Sample Form 1099-NEC
Form 1099-NEC
Source: IRS
How to File Form 1099-NEC
Form 1099-NEC has two copies: Copy A and Copy B. Copy A should be filed with the IRS, and Copy B should be sent directly to the contractor. Any contractor you hire and pay $600 or more for services rendered during a calendar year must report that income.
Contractors who receive Form 1099-NEC Copy B are not required to file the form. However, you should receive a copy of Form 1099-NEC and may request one from your employer if necessary for your records. Report any self-employment income on Schedule C.