The IRS has released a draft of new Form 1099-NEC, Nonemployee Compensation. This form will be used to report nonemployee compensation and indicate direct sales of $5,000 or more of consumer products, shifting them from boxes 7 and 9 of Form 1099-MISC, respectively.

An IRS notice requesting comments on the new form states that the specific purpose of Form 1099-NEC will be to "alleviate the burden and eliminate confusion regarding due dates" around Form 1099-MISC reporting. The PATH Act of 2015 moved the due date for filing information returns reporting nonemployee compensation from March 31 (if filed electronically) to January 31. As a result of this change, there are presently two different due dates for the Form 1099-MISC depending on what type of income is being reported on the form, which has created confusion and complications for both the IRS and Form 1099-MISC filers.

As currently drafted, the Form 1099-NEC will first be filed in January 2021 for payments made in 2020, while payments made in 2019 will continue to be reportable on Forms 1099-MISC in boxes 7 and 9. Presumably, a revised Form 1099-MISC will be released for reporting in 2021 that removes current boxes 7 and 9, and will continue to be due on March 31. The IRS requests comments on the Form 1099-NEC, which should be submitted on or before September 30, 2019 to be assured consideration by the form developers.

Implications

Given that virtually every business entity must report nonemployee compensation, this change will have a significant impact on the information reporting community and will create a great deal of confusion for their payees when they receive a Form 1099-NEC for the first time, and not a Form 1099-MISC.

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