New 1099-NEC Form Issued by the IRS
The IRS has issued a new 1099-NEC form for the 2020 tax year, changing the reporting process for any business that pays a contractor or freelancer more than $600 in a calendar year.
By law, the contingent worker is required to report to the business they have contracted with a taxpayer identification number or TIN. This usually falls within 4 categories:
• Social Security
• Employer identification
• Individual taxpayer identification
• Adoption taxpayer identification
Contractors who do not provide a TIN to the business they are providing services for can be subject to backup withholding which is the contingent worker’s portion of “employment” taxes that the business typically pays for W2 earners.
With the new form, the submission date has changed to February 1, 2021, and there is no automatic extension clause. However, businesses may obtain an extension for certain hardship conditions.
When contracting with contingent and freelance workers, businesses have an obligation to provide these workers with the appropriate paperwork so both the business and the freelancer can remain in compliance. Non-compliance can have potentially serious negative effects on a business. Keep on top of the latest compliance challenges and keep your business and contractors protected. Learn more about how you can maintain compliance in this free on-demand webinar.