1099 NEC & 1099 MISC Presented by Molly Van Kampen, CPP - Greenshades
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1099 NEC & 1099 MISC Presented by Molly Van Kampen, CPP
Greenshades Showcase
Today’s Agenda
Quick Introductions
Molly Van Kampen, CPP
Greenshades Chief Evangelist
Employee Classification: An Overview
m How to properly classify workers
Where common pitfalls lie
Forms 1099-MISC and 1099-NEC
i Changes to the forms for 2020
Updates for filing
Questions
Answering your questions about Forms 1099-NEC and 1099-MISC
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About Greenshades
• Solving difficult problems for our customers LinkedIn:
Greenshades Software
• Providing a series of tax, compliance, and HR
utilities
Twitter:
@Greenshades_
• Flagship offering is a complete Payroll/HR
platform that supports the entire employee
lifecycle Instagram:
@Greenshades_
• Over 15 years of experience and expertise
Facebook:
• Serving 4,000 clients across North America Greenshades Software
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Today’s Presenter
Molly Van Kampen, CPP
Chief Evangelist, Greenshades Software
• Certified Payroll Professional
• Expertise in interpretation and application of
payroll-related taxation and compliancy issues
• Part of the Greenshades team for over 15 years
• Frequent presenter & thought leader at
industry and partner events
• Also likes cats
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A Few Legal Notes
• Do not construe this content as formal legal
advice.
• Always check with your local counsel, as well as
your organization’s accounting teams.
• We’re providing high-level insights and guidance,
but you should be aware of state- and region-
specific impact.
• Greenshades partner myHRCounsel is extending
an opportunity to leverage their expertise at a low
monthly cost.
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Poll
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Complexity and Costs Influence the
Employer/Employee Relationship
Employee Independent Contractor
• Pay statements subject to state requirements • Contractors often submit invoices to be paid on
agreed upon terms
• Subject to FLSA (minimum wage, overtime,
etc) • 1099 reporting
• Withholding of employment taxes • Contractors are responsible for their own
income taxes, healthcare, and reporting
• Employer paid match/taxes
• W-2 (state, federal, local) reporting
• Subject to Affordable Care Act and EEOC
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Where it can go wrong…
Employment taxes and withholdings are often cited as the major cause of
intentional misclassification
• The employer is responsible to withhold, match (as
applicable), report and remit employment taxes:
• Income tax withholding
• Social Security
• Medicare
• FUTA
• Unemployment Insurance
• State Disability Insurance
• Family/sick leave
• Garnishments
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How to be sure you’re right
Common Law Test for Classification
The Common Law Test is often used to identify if a
worker is an employee or Independent Contractor
and is functionally a series of factors that identify how
much control the company has over the worker and
how they perform the work asked of them.
• Behavioral Control
• Financial Control
• Relationship of the Parties
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Other Factors
Behavior Control
• How much control does the business have on the details of how a job is performed?
• Is training expected?
• What type of instruction/oversight is expected or offered ongoing?
Financial Control
• Are expenses reimbursed if not provided by the company?
• Can the worker provide the same/similar services to the public while working?
• Can the worker lose money as a result of the work performed?
• How is the worker paid?
• Frequency
• Taxes withheld
• Type of annual information return
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Finally, don’t forget to consider…
Relationship of the Parties
• Is the work performed under the terms of a contract (specified start and end date)?
• Is the worker eligible for company paid benefits (health insurance, paid time off, etc.)?
• Is the job being performed an “important aspect of regular business operations”?
• Are there others in the organization performing the same/similar work?
Things that DO NOT matter for classification A proposed new rule is under
consideration and could
• Part time vs. Full time work change these details slightly.
• Location of work performed For full details visit
https://www.dol.gov/agencies/w
• Duration of work
hd/flsa/2020-independent-
• Age contractor-nprm
• Position
It’s important to be consistent in classification!
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Forms 1099
• Form 1099 is used to report money that is paid to
someone who isn’t a W-2 employee.
• There are several types of 1099 forms, including
versions for canceled debt, dividends paid, interest
accrued, and money received from the state.
• 1099s are some of the most commonly used
business tax forms each year.
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What’s New for 2020
Form 1099-NEC
• Form 1099-NEC has returned for tax year
2020 – it hasn’t been in use since 1982
• 1099-NEC is specifically for reporting Non-
Employee Compensation
• Use 1099-NEC for independent contractors,
gig workers, and other non-W-2 employees
• You will no longer report non-employee
compensation on Form 1099-MISC (formerly
box 7)
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Poll
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Why did Form 1099-NEC Return?
• Since 1983, Non-employee Compensation of $600 or more was reported in Box 7 on the 1099-
MISC.
• Attempting to assist in the protection of American taxpayers from increasing tax fraud, the PATH Act
of 2015 (among other things) accelerated the filing deadlines of the federal 1099-MISC returns,
including Box 7 income, to January 31.
• Starting in 2017, 1099-MISC without Box 7 information returns were due to the IRS either the last
day of February, if filing on paper, or the last day of March, for electronic filers.
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Why did Form 1099-NEC Return?
• For tax year 2018, the IRS began to require those filing 1099-MISC with non-employee
compensation to file TWO 1099-MISC forms: one with non-employee compensation (Box 7) and
one with everything else.
• Forms reporting non-employee compensation had an earlier filing deadline than those who did not
report non-employee compensation. Even a single Box 7 form, accidentally filed with a set of non-
Box 7 returns, would cause penalty for the entire set of records and caused costly penalties.
• Many of the penalties were eventually abated or forgiven, causing expensive processes and
frustration for taxpayers and lawmakers alike.
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When to use Form 1099-NEC
You MUST use Form 1099-NEC if…
• You made a payment to someone who isn’t your employee
• Payment was made for services in the course of your trade
or business
• Payment was made to an individual, partnership, estate, or
(sometimes) a corporation
• Payment was $600 or more for the year
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When to use Form 1099-MISC
You will use Form 1099-MISC if…
• You paid out at least $10 in royalties
• You paid out at least $600 in categories like rent, prizes,
medical/healthcare payments, fishing boat proceeds, and
crop insurance
• You made direct sales of at least $5,000 of consumer
products to a buyer for resale anywhere other than a
permanent retail establishment
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Poll
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What About Attorney Fees?
• Payments to attorneys (including individuals, law
firms, or other providers of legal services), for
attorneys' fees of $600 or more are reportable in
Box 1 of the 1099-NEC.
• Payments made to an attorney in connection with
legal services, but not for the attorney's services
(such as a settlement agreement), in amounts of
$600 or more are reportable in Box 10 of the
1099-MISC.
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Old vs New: Forms 1099-MISC
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The New Form 1099-NEC
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Form 1099 Filing Deadlines
• Form 1099-NEC – distribute to recipients and file with IRS
on or before the last day of January (February 1, 2021,
since January 31 is a Sunday)
• Deadline applies to both paper and electronic filing
• No automatic extension is available for Form 1099-NEC
• Form 1099-MISC
• On or before March 1, 2021 for paper filing
• On or before March 31, 2021 for electronic filing
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Important Notes and Tips
• Be sure to keep non-employee compensation data
separate from other 1099-MISC data for ease of
reporting.
• 1099-NEC has not been included in the 2020
Combined Federal/State filing program
• States will have to adjust to the new 1099-NEC
depending on how much of the state’s regulation is
based on the previous 1099-MISC. Be sure to check
with your state for 2020 reporting requirements
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Greenshades 1099 Solutions
• An integrated module for W2 and 1099 printing and E-
Filing
• Easy editing to form data
• Print 1099 to blank paper
• Full mailing service option for outsourced delivery of
vendor forms
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Top Five Reasons to Outsourcing Year-End Processing
EMPLOYEE SAFETY REGULATORY COMPLIANCE
Although COVID-related restrictions are easing in Thanks to the COVID crisis, 2020 has a unique and
some locations, many employees are still concerned diverse array of policies that have been added to
for their safety and the safety of their loved ones. the books. Greenshades' expert team keeps up-to-
Outsourcing your print & mail services keeps them date on everything impacting your business so you
safe at home. don't have to.
COST CONTAINMENT PROCESS FLEXIBILITY
Disinfecting the workplace can be a costly As your businesses needs evolve, so too will the
proposition, ranging from $1 to $10 per square foot. size, composition, and nature of your workforce.
Add-in personnel costs required to print and mail Outsourcing empowers you to effectively scale
forms and outsourcing stands as a more economical both capabilities and capacity on-the-fly.
option.
RISK MITIGATION
The old saying "measure twice, cut once" seems
tailor-made for year-end tax processing. Our
research and validation services catch and correct
issues before they can impact your company or your 26
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Questions
27GET STARTED TODAY Ready to end 2020 with your best foot forward? Make Greenshades part of your team today! Contact us and let us take your payroll, HR, and year-end processes to the next level. Greenshades is ready to help, so email or call now! Contact Sales www.greenshades.com sales@greenshades.com (888) 255-3815 ext. 2
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