The new 1099-NEC comes with a new IRS due date of January 31
The year 2020 certainly had its challenges. And while we’re all hoping 2021 will take that down a notch, we have to start out with the challenge of updating systems to address the new IRS 1099 reporting requirements: Subcontractor payments have been split out of the 1099-MISC to a new 1099-NEC report.
Please consult with your CPA and refer to the IRS website for legal details. Here’s an overview:
The 1099-MISC has been reformatted and retains reporting for rents (box 1), royalties (box 2), prizes and other income payments (box 3), fishing boat proceeds (box 5), medical and health care payments (box 6), crop insurance proceeds (box 9), payments to an attorney (box 10), section 409A deferrals (box 12) and nonqualified deferred compensation (box 14).
The brand new 1099-NEC must be used for “Non-Employee Compensation,” meaning “subcontractors” (previously reported on the 1099-MISC in box 7).
Importantly, IRS regulations specify the forms must be provided to the recipients by January 31, 2021 and penalties are steep!
Thus, time is short and accommodating this will require immediate program updates to your AccountMate system (if iSOFT hasn’t already applied those updates for you) if you’re using the Accounts Payable module, so please read on…
AccountMate recorded a one-hour webinar on the system changes and reporting via Aatrix on December 23rd, which you can watch on their website.
➤ If you’re running AccountMate/SQL version 9/10/11 or AccountMate/LAN version 8/9/10 and have an active Lifecycle plan, then the 1099 update for modifications and instructions are provided as a benefit of that. Please note that iSOFT’s installation services and possible integration effort to existing modifications are not included in the Lifecycle agreement and would be billable work.
➤ If you’re running AccountMate/SQL version 9/10/11 or AccountMate/LAN version 8/9/10 and DO NOT have an active Lifecycle plan, then AccountMate corporate has a special offer to provide the enhancement, so please contact iSOFT immediately.
➤ If you’re running AccountMate/SQL version 8 or prior, or AccountMate/LAN version 7 or prior, then… well… the options are limited. We can discuss customizing your system or upgrading to a recent version, neither of which will be easily done in the time frame available but let’s talk through options. The alternative is manual reporting—a tedious and error-prone process since it will require exporting or transcribing data from your system. We’re still very interested in discussing getting your system current as it’s just about a guarantee that we’ll be seeing additional tax law changes in the future.