The IRS brought back Form 1099-NEC for the 2020 tax year after nearly forty years. Businesses now use the form to report nonemployee compensation (NEC) paid to contractors, freelancers, and self-employed workers.
Why Did the IRS Reinstate Form 1099-NEC?
The IRS made the change to reduce confusion and make reporting easier. In particular, it responded to changes in deadlines introduced by the PATH Act (Protecting Americans from Tax Hikes Act of 2015).
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New Deadline for NEC Payments
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The PATH Act moved the deadline for reporting nonemployee compensation from March 31 (for e-filing) to January 31.
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Other types of payments, like rents and royalties on Form 1099-MISC, kept the later deadline.
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As a result, many filers had to send two different 1099-MISC forms, which created mistakes.
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Avoiding Errors
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By reintroducing Form 1099-NEC, the IRS separated nonemployee compensation from other income types.
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This cut down on duplicate filings and helped businesses stay compliant.
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👉 Related: 1099-NEC Software
What Changed After the Reinstatement?
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Form 1099-NEC
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Reports nonemployee compensation only.
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Must be sent to the IRS and recipients by January 31 (or the next business day if that date falls on a weekend/holiday).
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Form 1099-MISC
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Still reports other payments like rents, prizes, and royalties.
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Retains the March 31 e-filing deadline.
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Impact on Businesses
The change simplified the filing process for companies paying independent contractors. For example, it gave businesses a single clear deadline for reporting NEC.
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Reduced confusion over which form to use.
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Improved IRS tracking of contractor income.
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Helped prevent underreporting.
👉 Related: IRS Instructions for Form 1099-NEC