1099-NEC vs. 1099-MISC, What is the Difference? - YouTube

Hi everyone, my name is Ara Oghoorian.  I'm with ACap Advisors and Accountants,  

and welcome to another episode of the ACap ReCap,

where we go beyond the blog and to  give you quick financial and tax tips.  

These are topics based on actual questions we  receive from you, or on a particular hot topic. 

In this episode, we're going to talk about  the new 1099-NEC form, and how it replaces  

the previous 1099-MISC form. But before we  begin, remember to subscribe to our channel,  

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Welcome back! In today's episode, we're going  to talk about the 1099-NEC form. Chances are, if  

you're a business owner and you have independent  contractors, that you pay or vendors that you pay,  

every year you have to pay that, you have to  issue them what's called the 1099-MISC form,  

or if you are a freelancer, you're most  likely have received these 1099-MISC  

forms. And the purpose of the 1099-MISC form  is to show to the IRS either that you've paid  

someone a certain amount of money and then  if you are a recipient of a 1099-MISC form,  

is to show the IRS that now you've earned  this money and that you have to pay tax on it.  

So, in today's episode we're going to cover  the new form 1099-NEC, and how it replaces the  

previous 1099-MISC. So, we're going to cover what  the two differences are between the two forms,  

we're also going to cover what the  threshold is for filing the new 1099-NEC,  

and we're going to talk about when the  due date is for actually filing the 1099s,  

and then lastly, we're going to talk  about some of the exemptions, basically  

what are some instances where you don't have to  file a 1099, even if you're above that threshold. 

So, what is the new 1099-NEC form, and how  does it differ from the 1099-MISC form? 

Now, NEC stands for non-employee compensation.  This is a new form that the IRS has  

changed for 2020, which is due in 2021,  and it replaces a Miscellaneous form  

only for non-employee compensation, and the purpose of the form is that you're  

reporting to the IRS, that you paid someone  a certain amount of money, and so the IRS can  

cross-check that person's tax record to make sure  that they are also reporting that income to ensure  

that proper taxes are paid for that individual.  Now, the 1099-MISC form isn't going away,  

it's just being used for other payments. So, if you have non-employee compensation,  

you issue them a 1099-NEC, but if you're paying  rent to someone, royalties, prize money, health  

care payments, payments to an attorney, or other  income, you will continue to use the 1099-MISC.  

So, again, the 1099-NEC is only for independent  contractors that you pay, you would only use  

that form for those payments. So, what is the  threshold, and what are the due dates for the  

1099-NEC? The threshold depends on the nature of  the payment. It's $600 for any payment other than  

interest and royalties. For interest and royalties  the threshold is $10 and for any other payments  

is $600. So, for example, if you paid a contractor  $600 or more, you would have to file the 1099-NEC.  

However, if you paid someone interest or royalties  of $10 or more, then the threshold as you can see  

falls below that $600, and you'd have to file a  1099. The due date is February 1 of 2021. So, it's  

coming up relatively soon, and it's right after  the New Year. So, you have to actually file these  

with the IRS by February 1 of 2021, to ensure the  individual receives that 1099-NEC. So, are there  

any exceptions to filing the 1099-NEC form? And the answer is - Yes! It depends,  

if you're paying a corporation including an LLC,  taxes as a C corporation, or an S corporation,  

or rents paid to a real estate agent, or a  property manager, those are exempt from filing  

a 1099-NEC. However, I would still recommend  preemptively filing one anyway just in case.  

There's also exceptions to the exception.  So, for example, if you pay an attorney,  

even if they are a corporation, a C-corp, or an  S-corp, you still have to file a 1099, regardless  

of the income. The other is, if you have medical  payments that you pay to a health care company,  

those are also still reportable, even if  that is a corporation. So, in closing,  

the process for filing 1099s in 2020 or for 2020,  is completely different than in prior years. 

If you have non-employee compensation that you  have paid, the new form you have to use is a  

1099-NEC, you can no longer use the 1099-MISC.  However, if it's any other type of payment, then  

you can continue to use the 1099-MISC form. As  you can see, which form to use and when to file,  

it is very important. So, it's important  to contact your CPA or work with a CPA,  

who fully understands which form you need to  file, and the deadline for filing those forms,  

because, if you don't file the forms on time,  then you're going to face stiff penalties,  

based on the dollar amount and the length  of time, that you do not file that form.