2020 1099 Changes
The 2020 1099 season is upon us and there have been a few changes that you need to be aware of when preparing 1099s for your clients. I’ve pulled together information from several different resources to try to help you.
IRS 2020 1099 Guidance
1099-Misc has now been split up into 2 forms to pull out any Non-employment compensation. What used to be box 7 is now its own informational return – 1099-NEC.
On a side note – Why does the IRS make it so difficult to find the form for the correct year? I had to hunt down the correct links to the 2020 forms. If you go directly to the website, you will most likely be directed to the 2021 form.
- Instructions for Forms 1099-MISC and 1099-NEC (2020)
- About 1099-MISC
- 2020 1099-MISC Form
- Due to the recipient by February 1, 2021
- Due to the IRS by March 31, 2021 (if you file electronically – otherwise March 1, 2021)
- About 1099-NEC
- 2020 1099-NEC Form
- Due to the recipient and the IRS by February 1, 2021
- Form W-9
- Instructions for Form W-9
Data Gathered From Your Accounting System
I’m not sure it is the best way, but I worry about so many potential mistakes on data entry, that I end up just downloading the complete ledger by name. Then, I go through to manually review the information and calculate the amount paid by ACH, Check, or Cash. You can easily compare that to whatever 1099 report your accounting system might have to make sure everything is lining up. See, there is room for error either way. (1) There could be an error with not filling in the fields correctly in the accounting system or (2) There could be an error with just your manual review process. Both are highly prone to human error.
1099 Software for 2020
Here are several software programs that can help you prepare 1099s. You do not want to do prepare 1099s manually. It is a huge waste of time and effort. There are a ton out there, but I feel like it really comes down to a few popular programs. No matter what you choose, you need to be sure that you completely understand how the software works.
- QuickBooks 1099 e-file
- Also, several payroll companies will file the 1099s for you if you had put the contractor information in for the year.
Other 2020 1099 Resources
Here are some articles to check out to help you during your 1099 preparation.
- IRS Takes Non-Employee Compensation Out of 1099-MISC: New Form 1099-NEC (CPA Practice Advisor)
- What Is Form 1099-NEC? (The Balance Small Business)
- There’s A New Tax Form – With Some Changes – For Freelancers & Gig Workers (Forbes)
- When Do You Need to Issue 1099s? (AccountingDepartment.com)