Why The IRS Requires the Updated 1099-NEC Form for Contractors
It’s this time of year that every small business owner fears – tax time! Unfortunately, this year there are some new tax forms that every small business must use.
On this week’s Small Business Radio Show, Jaime Lizotte, the manager of Tax Compliance Solutions at efile4Biz, discusses the new tax form for the block, the 1099-NEC, and who needs one.
Jaime Lizotte on IRS 1099-NEC form
According to Jaime, the IRS re-introduced the 1099-NEC for all non-salaried employee compensation to replace Box 7 on the traditional 1099-MISC form. The 1099 form can still be used for other paid royalties, rentals, and other rewards.
Jaime reminds all small business owners that this is a critical form that must be submitted by January 31, 2021 by any company that has independent contractors or third parties for services that are not on a payroll. “If you’ve paid $ 600 or more from your debt or withheld federal income taxes from vendors, you will likely need to submit this form.”
There are also changes to the automatic 30-day renewal for 2021 if you have to file 1099s and W-2s late. Jamie explains that the expansion is no longer automatic. “You must fill out and submit Form 8809 to apply for an extension – and you must have a grave reason for not complying with the dates like a natural disaster. “Form 8809 must be submitted by January 31, 2020. However, it is important to note that an extension does not extend the reporting deadline for the recipient of the form. You still have to bring out recipient copies by January 31st, otherwise you face penalties.
Small businesses can file all of these forms with the government and send them to recipients through efile4Biz. You can also check online to see if they have been received.
Listen to the entire interview to understand how to use the updated form on the Small Business Radio Show.
Image: Jaime Lizotte