What is nonemployee compensation? by John Heveron
If the following four conditions are met, you must generally report a payment as NEC.
- You made the payment to someone who is not your employee.
- You made the payment for services in the course of your trade or business (including government agencies and nonprofit organizations).
- You made the payment to an individual, partnership, estate, or, in some cases, a corporation.
- You made payments to the payee of at least $600 during the year.
Trade or business reporting only.
Report on Form 1099-NEC only when payments are made in the course of your trade or business. Personal payments are not reportable. You are engaged in a trade or business if you operate for gain or profit. However, nonprofit organizations are considered to be engaged in a trade or business and are subject to these reporting requirements.
Due Date. Form 1099 is due January 31, 2020 (presumably February 1 because the 31st is a Sunday). The due date doesn’t get extended with electronic filing.
Exceptions. Some payments do not have to be reported on Form 1099-NEC, although they may be taxable to the recipient. Payments for which a Form 1099-NEC is not required include all of the following.
- Generally, payments to a corporation (including a limited liability company (LLC) that is treated as a C or S corporation). However.
- Payments for merchandise, utilities, freight, storage, and similar items.
- Business travel allowances paid to employees (report on Form W-2).
- Cost of current life insurance protection (report on Form W-2 or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.).
- Payments to a tax-exempt organization including tax-exempt trusts (IRAs, HSAs, Archer MSAs, Coverdell ESAs, and ABLE (529A) accounts), the United States, a state, the District of Columbia, a U.S. possession, or a foreign government.