06 Aug Everything Old Is New Again
The IRS has released a draft of a “new” tax reporting form that’s not so new: the 1099-NEC.
Take care claiming, “I remember that one” or someone might suggest it’s time to retire! When the form was last used, Ronald Reagan was president, Michael Jackson’s “Thriller” was released, E.T. wanted to phone home, and the 21-year-old Princess Diana was perhaps the most famous person in America. (The original Top Gun movie was still four years away from release.)
The IRS draft form release brings to mind the Carole Bayer Sager/Peter Allen song: “Don’t throw the past away, You might need it some rainy day, Dreams can come true again, When everything old is new again!”
The 1099-NEC – NEC standing for Non-Employee Compensation – was replaced after 1982 with the catchall 1099-MISC. So has someone at the IRS gone nostalgic? Nah. The agency is trying to fix some of the unintended consequences of the PATH Act.
Passed in 2015, among other things the PATH Act changed the reporting deadline for Box 7 of the 1099-MISC for reporting non-employee compensation to January 31st. We all remember that! That resulted in different filing deadlines for different parts of the 1099-MISC. It was confusing not only for payers and payees, it was confusing for the IRS and its systems as well. And if a batch of 1099s filed by March 31 included an errant Box 7 report, the whole batch might be considered late, so confusion extended to penalties.
Further, the earlier reporting deadline combined with a delay in IRS refunds also created an opportunity for fraud, as explained by tax expert Kelly Phillips writing in Forbes.
So the idea is to separate out non-employee compensation (Box 7) reporting once again (along with Box 9, “Payer made direct sales of $5,000 or more of consumer products to a buyer [recipient] for resale”).
Get a look at the draft form 1099-NEC here. But note that it is only a draft, and not ready for use. It might be put in service for reporting on the 2020 tax year, i.e. your January 2021 filings. So you’ve got time to get to the vintage clothing stores to update your wardrobe, and make that hair appointment.
To learn more about vendor verification and compliance click here to request more information or call (678) 335-5735.