Last year an estimated 70% of filers were impacted by the 1099-MISC (box 7) form change. The 1099-NEC (for reporting nonemployee compensation) took its place as one of the most popular forms filed. This form change caused substantial confusion and disruption to businesses. Here are the top five things you should know about Form 1099-NEC, before the upcoming deadline this tax season.

1. 1099-NEC Form Change for Tax Year 2021:

   For tax year 2021, the IRS has redesigned Form 1099-NEC to three forms per page. The prior year the form was constructed of two forms. Due to this change, a new envelope will be required for distributing recipient copies.

2. Paper Shortages:

   Some businesses ran into issues with obtaining Form 1099-NEC in time for the federal deadline last year. This caused a bit of panic in businesses who waited until late January to file, concerned they might receive unwanted fines. Prepare early this year to ensure you have all your forms or consider e-filing.

3. When in Doubt E-file:

   There are several ways to file. One of the best ways to avoid issues, like the ones mentioned above, is to use an electronic filing solution. With all-inclusive e-filing programs, filers don’t have to worry about any future form changes. Companies like Nelco, have experts working year-round to handle any W-2, 1099 and 1095 regulation changes. They even offer print, mail and online retrieval services for recipient delivery. Allowing filers, a totally paperless filing experience.

4. Form 1099-NEC vs 1099-MISC:
   • Form 1099-NEC is used only for businesses to report nonemployee compensation.
   • Form 1099-MISC is still required for reporting $600 or more in other types of income, such as awards, prizes, royalties or rent.
5. Federal and State 1099-NEC Requirements:
   • Federal reporting is required. The IRS has set an effective filing due date of
     January 31, 2022.
   • Over 30 states are supporting Form 1099-NEC. Deadlines and requirements vary by state.

For additional information about Form 1099-NEC, visit NelcoSolutions.com or IRS.gov.