Form 1099-NEC

The House of Representatives continues work on a reconciliation bill that would enact significant tax provisions and spending cuts.  The various legislative committees have completed work on the areas of the bill within their jurisdiction, including the Ways and Means Committee, which proposed language that would enact $3.8 trillion in tax cuts over the next ten years.  Over the weekend, the House Budget Committee consolidated the legislation, and the House Bill is now before the Rules Committee, where a managers’ amendment may be considered before it heads to the House floor.  This article is one of a series of articles discussing various proposals in the legislation that touch on tax withholding, reporting, and fringe benefits.

The House Bill proposes to increase the thresholds under current law for information returns required under sections 6041 and section 6050W, as described in more detail below, as well as to modify section 3406 (requiring backup withholding) to align with this proposed change.  Continue Reading House Reconciliation Bill Would Increase Thresholds for Reporting Obligations under Sections 6041 and 6050W

Last week, the Treasury Department released the “Green Book,” formally known as the General Explanations of the Administration’s Revenue Proposals.  Among its proposals, the Green Book includes a new proposal that could signal stepped-up enforcement of section 409A, as well as a new tool for the IRS.  Section 409A, adopted almost two decades ago, represented a significant shift in the tax treatment of non-qualified deferred compensation plans.  Prior to its adoption, these plans often relied on traditional concepts of constructive receipt to determine when it was required that a plan participant recognize income.  Section 409A overlaid those principles with significant new rules regarding the time that an election to defer compensation must be made, as well as limitations on the time and form of payment of deferred compensation.
Continue Reading Administration Proposes New Withholding Requirements for 409A Failures

As the end of the year approaches, many accounts payable departments are gearing up to complete their annual Form 1099 filings.  For 2020, a new form, Form 1099-NEC, will be used to report payments of non-employee compensation to vendors. (See earlier coverage.)  The IRS resurrected the Form 1099-NEC, which had not been used in decades, to replace Box 7 reporting on Form 1099-MISC because the Protecting Americans from Tax Hikes (PATH) Act accelerated the filing deadline for non-employee compensation to January 31.  The rules for reporting on Form 1099-NEC are generally the same as for reporting in Box 7 of Form 1099-MISC in the past.  However, the reporting requirements for the two may differ at the state level.
Continue Reading Form 1099-NEC Creates State Filing Headaches

In the category of “everything old is new again,” the IRS announced in late July that it intends to require that nonemployee compensation (“NEC”) paid during the 2020 calendar year be reported on new Form 1099-NEC, instead of being reported in Box 7 of Form 1099-MISC.  A draft of Form 1099-NEC was posted on the IRS website for public comments, which are due by September 30.  The change comes in response to statutory changes made in 2015 by the Protecting Americans from Tax Hikes (PATH) Act.
Continue Reading IRS Plans to Resuscitate Long-Dead Form 1099-NEC