Electronic Signature 1099-MISC Form Made Easy

Esign 1099 misc form

[Music] today i want to take a look at a brand new form for small business for all businesses it's called the 1099 nec the non-employee compensation again it's a new form and it's taken part of the information we were reporting on the 1099 miscellaneous and moving it to the nec but before we just jump into the form and how it's changed probably just a little bit of history of why you know it's one thing to say here's the form but i think the other thing i kind of always want to know why so if i go back over 35 years ago there was actually a 1099 nec an unemployed compensation and there were several other 1099s so as when we look back at that time they were looking at possibly electronics they were looking at trying to get all the information they could on one form so they started aggregating it together as time moved on and that eliminated the 1099 nec back again over 35 years ago so this is an old form brought back to life so today our focus is looking at what happened how is this created so number one is that as you know with information reporting being electronic and deadlines the 1099 miscellaneous with extension you can go up 2019 and prior you could go up to march 31st before reporting a few years ago uh the path act about five years ago changed it but gave the irs time to program and if you remember even like the w-2s they shortened up whenever they uh reporting was they also held off credits that were refundable until february 15th so as they move the deadline later for you to be able to get a refundable credit on it on a 1040. now what this is an attempt is to slide back and make the requirement like they've tightened up on the w-2 for the non-employee compensation which is a highly non-compliant area but the big thing was actually dealing with the dates so right here i want to i'm going to look at an old last year and i'm going to highlight this it's a 1099 miscellaneous for 2019. this is what we did last year oh law and then we're going up with new law so we're going to transition this so what happened was that we had this line here called line box seven right there non-employee compensation well that was with all these other boxes and some of these other boxes the information was not ready by january 31st so or actually it's due february first for this new form so what they did is they pulled this box off of the 19 return and i'm going to slide over here the new 20 20 non-employee compensation kind of line them up here together and so what what i have here is they we have a new form this is in 2020 let me be consistent here i'm going to highlight that and then we got a non-employee compensation form so literally i'm going to take my i'm going to take a different color marker here and what we have literally done is we have taken the non-employee compensation out of 2019 right here and we've moved it up to right there that is that it in a nutshell that is the new non-employee compensation well that's the form but now what i want to do so all that happened to the 1099 miscellaneous which i'll be doing under a different seminar i'll be going through the detail on that i'm going to take this away now and what our focus now is this form the question then we need to know what when in the old box seven see it's just one thing to say well what was the o box seven put in the new 1099 nec but let's do a review what should go on now the 1099 nec which is very consistent with the old box 7 miscellaneous so if we'll i'm going to go down here and now we're going to focus and i'll highlight that i'm going to focus on box one so if you look here at box one what goes in there and there's actually there there is actually four requirements that need to be met one is that whoever you're making this payment to is not an employee two it's part of your course of trade or business and what that means is that if i pay somebody to mow my lawn at my home that's not trade or business but if i'm owned if i'm paying somebody to mow the lawn at the office that is trader business one of the other of the four requirements here here on line one is the fact that it if it's greater than 600 dollars cumulative for the year so you may be writing them out twenty dollars a week every week from on that lawn but when that accumulates to 600 what you have to do is issue that person a 1099 nec by or before february 1st so it's due february 1st well as you can see there that shortened up that reporting requirement from march 31st all the way back to february first big big change also i want to say there is no extension on the 1099 nec and when i get to the end of this video and i do a recap i'm going to go back over there is no extension it's due by february 1st so we've got to really think about our accounting and our software so uh the important thing is you got to meet the four requirements i think i left out of those four i left out who too it's the partnerships llc's sole proprietors anybody but a person that is a corporation and there's some exceptions to that but the general rule is you don't have to issue a 1099 nec to like a c corporation those are the four requirements of why you need to report it on box seven not an employee it's a partnership it's an llc it's a sole proprietor it's over six hundred dollars for what you have wrote checks for in a trader business now who all does that include and that is then who and typically this is related to self-employment but the items that go here in box seven is some of the examples would be the person mowing the lawn if i have a vet on the farm and the vet works animals and it goes over six hundred dollars even though there's medicine in that bill i still have to issue it it's for professional fees it's for accountants it's for attorneys it's it's for services rendered uh if you have a company truck worked on and the major part of that is labor then that labor the whole thing unless it's broke on separate invoices all goes into that 1099 nec and i always say this when in doubt included in the nec because you have written that trade that other company you have written them in check so i think it's important uh that what goes in box box one here is actually what went in the old box seven on the 1099 miscellaneous so that part of qualifying for what goes in the box has not changed you know some of the other examples one of them is bartering and actually in the instructions it even covers bartering for services you trade a call a trade out it would be an attorney trading out for meals at a restaurant it would be you know just any kind of again bartering or trade-outs it's the fair market value of that item so again a very broad list it's for services and you always think of services it's for labor it's for contract labor again nothing has changed on what goes in now on the new 1099 nec box one same set of rules that was for the 2019 and prior 1099 miscellaneous box seven so as we go in and look through you can see on this form you may have federal withholdings here in box four so not a lot of information you may have states there's a dotted line here where you can report up to two different states now while we're here in the new 1099 nec the reporting to the state is your separate responsibility the irs does not automatically report this back to the state so whatever state you're in or your clients in you're going to have to look at the state requirements but you're going to have to provide the states this information additionally so that is that is a change so again number wise what amount goes in here we've covered the four requirements and then the types of the examples we've covered then we may have federal withholding not normally that would be if you got a notice for backup withholding for example if they gave you a wrong social security or federal id number here on the left and then state requirement and then finally if we go over to the left side it's the normal name address the payors id number the recipients the recipient's name name and address so i think that's really important so now what i would like to do i'm going to slide this out of the way and i'm going to come in and i'm actually going to look at an example here so this is an illustrated example of how to do the reporting it says complete form 1099 nsc it illustrates in the following example z builder okay that's the payer is a contractor that subcontracts drywall and i'm doing this example because i think this is really neat this here is say whoever z builder is working for will probably be issuing them at 1099 nec and non-employee compensation and then z builder here is going to issue a subcontract drywall to the subcontractor ron green so proprietor okay remember our requirements it's called one it's a sole proprietor it's nz's trader business and mr green is not an employee and we're going to find out it's over 600 okay during the year going back to the exam going back to this example during the year z builder pays mr green 5500. so we've hit her fourth our fourth requirement to issue an nec z builder fills out a 1099 nec because again they paid over 600 so what happens is the amount was paid use my highlighter again was fifty five hundred dollars if you'll notice the rest of the right side where our numbers go and that's kind of you know if i lay this pin right here to the right is numbers and most of the time you're going to have an unemployed compensation and you're going to have a you may have a state where there's withholdings and state income after that then we again here we put down the 5500 and then we put down z builders information the id numbers run green dba y drywall address location this point in time we have now completed the 1099 nec in recap remember what happened was we took one box from the old box seven of the old 2019 miscellaneous income we then we then move it to the new form the new form nec for 2020 and number wise most of the time we're only going to worry about box one which is what we did here in the example pretty straightforward i think it's more important of the information that you're obtaining and discounting as a recap remember it is due by february 1st and for this year 2021 again february 1st 2021 so so you know as soon as possible you need to be doing this there is no 30-day extension as we had with the miscellaneous no extension this is required and the reason why as i said in the introduction it's in order to get that information in just like w-2's and all that information can be processed by the irs by so that they can start comparing it to the tax returns much faster with that i hope this helps please stay tuned thank you and have a great day