IRS Issues New Form for Nonemployee Compensation, Backup Withholding

The IRS has issued a new form for business taxpayers who pay or receive employee compensation.

The 1099-NEC Nonemployee Compensation form for business taxpayers must be completed beginning tax year 2020, the IRS said.

Payers must complete this form to report any payment of $600 or more to a payee.

In general, the 1099-NEC form must be filed by January 31. For 2020 tax returns, the due date is Feb. 1, 2021.

There is no automatic 30-day extension to file this form, although an extension may be available under certain hardship conditions, the IRS said.

Tax ID Numbers

The agency noted that nonemployee compensation may be subject to backup withholding if a payee has not provided a taxpayer identification number to the payer, or the IRS notifies the payer that the tax ID number provided was incorrect. 

A tax ID number can be a:

• Social Security number
• Employer identification number
• Individual taxpayer identification
• Adoption taxpayer identification

Backup Withholding

Backup withholding can apply to most types of payments reported on forms 1099 and W-2G.

This means the person or business paying the taxpayer does not generally withhold taxes from certain payments.

But there are circumstances under which the payer is required to withhold a certain percentage of tax to ensure the IRS receives the tax due on this income—also known as backup withholding.’

Here is more information on 1099 forms.