New IRS Reporting Roles For Independent Contractors

The Internal Revenue Service (IRS) has introduced a new form to report compensation paid to nonemployees. For tax year 2020, taxpayers must now use Form 1099-NEC to report payments for services of $600 or more made to nonemployees in the ordinary course of business. These payments were previously reported using Form 1099-MISC (the 1099-MISC will still need to be filed for other forms of payments such as royalties and rent). Nonemployees include independent contractors, third-party consultants, and attorneys who are not employed by the business. A business must issue a separate Form 1099-NEC for each nonemployee to whom it has paid at least $600 cumulatively during 2020 for services performed.