In mid-2019, the IRS released a tentative draft of a new form tied to 1099 filing: the 1099 NEC. This form, a resurrected version of the 1099 popular in the mid-20th century, is designed to alleviate some confusion associated with 1099-MISC filing dates. The 1099 has not been officially released by the IRS, but changing to this form is a logical decision that would make tax filing easier for many Americans who report nonemployment compensation. Below, we’ve outlined the crucial difference between form 1099 MISC vs 1099 NEC.
What’s the Purpose of the New Form?
First and foremost, the 1099 NEC is designed to replace Box 7 on the 1099-MISC. Legislation in 2015 caused the deadline for Box 7 information to change from March 31 to January 31, but the due date for non-Box 7 1099-MISC forms remained March 31. In essence, this change created two separate deadlines for the same form – and a lot of confusion.
The new 1099 NEC form replaces 1099-MISC box 7 altogether as a new form for reporting nonemployee compensation. If the IRS ultimately uses the form, 1099-MISC will then be used for all other types of miscellaneous compensation. That said, the IRS has not yet released a draft of a potential new 1099-MISC, so payees should continue to use the 1099-MISC for this type of income until told otherwise.
Form 1099 MISC for 2019 Filing
Currently, the 1099 MISC is among the most popular forms used by the IRS. It reports the total earnings a person receives, typically if they are self-employed or independent contractors. Clients send out 1099-MISCs every year in place of W-2 forms, which are used for traditional employees and employers. However, the 1099 MISC is also used as a catch-all form for all other types of income, including awards, proceeds, and prizes. This makes the form more complicated than one might expect, pointing up the need for a separate form designed specifically for nonemployment compensation.
What’s the Difference?
The answer to 1099 MISC vs 1099 NEC is nonemployment compensation. Also known as self-employment income, this is income received from a payer who classifies you, the payee, as an independent contractor rather than an employee. By instituting the 1099 NEC, the IRS would streamline income reporting for all self-employed people.
While the due date confusion on the current 1099-MISC is the primary cause of the IRS’s decision to draft a 1099 NEC, the increasing amount of independent contractor labor could also be to blame. With more workers using this form, it seems likely that many are making a mistake when it comes to filing deadlines. If you’re nervous about correctly filing 1099 NEC or 1099 MISC, a software program can alleviate some stress. Our W2 and 1099 Software, the base tool in our suite of accounting products, can help you get your filing right the first time. If the 1099 NEC is ever confirmed by the IRS, our software will update with the most recent version, allowing you to correctly file.