Prior to 2020, Form 1099-MISC was filed to report payments totaling at least $600 in a calendar year for services performed in a trade or business by someone who isn’t treated as an employee. These payments are referred to as nonemployee compensation (NEC) and the payment amount was reported in box 7.

Form 1099-NEC was reintroduced to alleviate the confusion caused by separate deadlines for Form 1099-MISC that report NEC in box 7 and all other Form 1099-MISC for paper filers and electronic filers. The IRS announced in July 2019 that, for 2020 and thereafter, it will reintroduce the previously retired Form 1099-NEC, which was last used in the 1980s.

Instructions for Forms 1099-MISC and 1099-NEC: https://www.irs.gov/forms-pubs/about-form-1099-nec

The 1099-NEC is straightforward: Box 1 is for non-employee compensation and Box 4 is for federal withholding for that contract employee. To put it simply, income that the company used to report in 1099-MISC Box 7 will now be reported in 1099-NEC Box 1.

According to the IRS, the people for whom an organization should use the new 1099-NEC are those with at least $600 in:

  • Services performed by someone who is not an employee (including parts and materials) (Box 1);
  • Cash payments for fish (or other aquatic life) that the company purchases from anyone engaged in the trade or business of catching fish (Box 1);
  • Payments to an attorney (Box 1). The term "attorney" includes a law firm or other provider of legal services. Attorneys' fees of $600 or more paid in the course of the organization’s trade or business are reportable in Box 1 of Form 1099-NEC, under Section 6041A(a)(1); or,
  • Each person from whom the company has withheld any federal income tax (report in Box 4) under the backup withholding rules, regardless of the amount of the payment.

Campus Administrators

The IRS says corrections to 1099-MISC box 7 for tax years 2019 and earlier will remain on the old 1099-MISC form.

  • Do verify that the recipient’s taxpayer ID is correct. You must have Form W-9 from each recipient with the current taxpayer ID before you complete Form 1099-NEC.
  • Don’t use Form 1099-NEC to report personal payments.
  • Don’t use Form 1099-NEC to report employee wages; use Form W-2 instead.
  • Don’t report gross proceeds to an attorney (not fees) on Form 1099-NEC; use Form 1099-MISC instead.
  • Don’t use Form 1099-NEC to report payments of rent to real estate agents or property managers; use Form 1099-MISC instead.
  • Distribute to recipients by January 31. (For 2021, the date is Feb. 1, since Jan. 31 falls on a Sunday).
  • File with the IRS by Jan. 31 (again, Feb. 1 in 2021) through paper or electronic filing.
  • As part of the Taxpayer First Act, many businesses will no longer be able to submit paper forms. For tax year 2020, the electronic filing threshold is 100 forms. Which means any business with 100 forms or more are required to e-file.

The biggest change is Box 7, which was previously used for reporting nonemployee compensation. The revised form includes other changes to the box numbers for reporting miscellaneous compensation, as follows:

  • Box 7: Direct sales of $5,000 or more
  • Box 9: Crop insurance proceeds
  • Box 10: Gross proceeds to an attorney
  • Box 12: Section 409A deferrals/li>
  • Box 14: Nonqualified deferred compensation
  • Do report gross proceeds to an attorney (not fees) on Form 1099-MISC.
  • Do complete a 1099-MISC if you made royalty payments of at least $10 during the year.
  • Do use Form 1099-MISC for miscellaneous income, such as rents, royalties, and medical and health care payments.
  • Don’t use Form 1099-MISC to report personal payments.
  • Don’t use Form 1099-MISC to report employee wages; use Form W-2 instead.
  • Distribute to recipients by January 31. (For 2021, the date is Feb. 1, since Jan. 31 falls on a Sunday).
  • File with the IRS by Feb. 28 (Mar. 1 in 2021) if filing by paper, Mar. 31 if filing electronically.
  • As part of the Taxpayer First Act, many businesses will no longer be able to submit paper forms. For tax year 2020, the electronic filing threshold is 100 forms. Which means any business with 100 forms or more are required to e-file.

Internal Revenue Service (IRS) Requirements

The IRS treats human subject payments, whether cash, check, gift card, or nonmonetary/tangible items as taxable income to the recipient. This means the recipient is supposed to report the payment when he or she files a personal tax return at the end of the year. As the payor, UMass must follow IRS regulations. The tax treatment of human subject payments depends on the amount paid, the recipient’s tax status, and whether the study takes place inside or outside the U.S.

If the university pays $600 (accumulated throughout the calendar year) or more to a U.S. tax resident during the calendar year, then the university is required to report the payments to the IRS and issue the recipient a Form 1099. UMass must collect a Form W-9, and they must be added to the university's supplier file. If such information needs to be confidential, then you can work with UPST to have them added to the 1099 file at Y/E. Payments to foreign nationals are reported on a Form 1042-S. UMass must collect a Form W8 and they must complete Glacier (Tax determination software for international suppliers).