New IRS Form 1099-NEC for Non-Employee Compensation, Including Directors’ Fees

Way back in 2015, the Protecting Americans from Tax Hikes (PATH) Act of 2015 accelerated the due date for filing any Form 1099 that includes nonemployee compensation (NEC) from February 28 to January 31 and eliminated the automatic 30-day extension for forms that include NEC. Rather than having different Form 1099-MISC due dates depending on whether NEC is reported, the IRS created a new Form 1099-NEC beginning with tax year 2020. (Form 1099-MISC still applies to “Miscellaneous Income,” but it has been revised/rearranged in light of Form 1099-NEC.)

Any trade or business must report NEC of $600 or more, including fees, commissions, prizes and awards for services performed as a nonemployee, and other forms of compensation for services performed for the trade or business by an individual who is not an employee, in box 1 on Form 1099-NEC. Companies must report directors' fees and other remuneration, including payments made after retirement, in box 1 on Form 1099-NEC in the year paid.

According to the instructions, certain amounts that are reported on Form 1099-MISC, such as (1) excess golden parachute payments (box 13 of Form 1099-MISC) and (2) nonqualified deferred compensation (NQDC) amounts (plus earnings) includible in gross income because the NQDC plan fails to satisfy the requirements of Code Sec. 409A (box 14 of Form 1099-MISC) are also reported in box 1 of the1099-NEC.

A Form 1099-NEC is not required for the Cost of current life insurance protection (report on Form W-2 or Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.) and payments to a tax-exempt organization including tax-exempt trusts (IRAs, HSAs, Archer MSAs, Coverdell ESAs, and ABLE (529A) accounts).

And don’t forget, if you are in the trade or business of purchasing fish for resale, you must report total cash payments of $600 or more paid during the year to any person who is engaged in the trade or business of catching fish.

This entry has been created for information and planning purposes. It is not intended to be, nor should it be substituted for, legal advice, which turns on specific facts.