Is Form 1099-MISC different from a 1099-NEC? A Form 1099-NEC is not just another variant of the 1099 form. Understanding this form and how it differs from a 1099-MISC is vital to inputting the appropriate information and format on a tax return. Here are some keyways in which the two forms differ.
Why FSM Businesses Need Form 1099-NEC and How to Apply?
Field service companies use Form 1099-NEC to record independent contractors. According to the IRS, contractors who earn more than $600 per year must file their tax returns by January 31. Only if the field service company provides a valid reason exception may be granted.
While we’re focusing on Form 1099-NEC, it is essential to also know about Form 1099 -MISC and how they can help in a field service business.
How Does Form 1099-MISC Differ from 1099-NEC?
Many real estate and property management companies use the 1099-MISC form in their field service operations. According to the IRS, the 1099-MISC form reports payments not subject to self-employment tax. In this form, the business is writing a miscellaneous payment made by a field service company, which is why it is called “MISC.” These payments are not subject to self-employment taxes. Some eligible reimbursements include rent, legal settlements, and rewards.
Form 1099-NEC is used by field service businesses to report compensation for nonemployees most likely subject to self-employment tax. Freelancers and independent service providers often use this form. Self-employed people should refrain from using the Nonemployee Compensation form (NEC).
Usually, Form 1099-MISC is used to report payments to individuals other than those listed on the 1099-NEC form. There are a few examples of compensation for nonemployees, such as awards, commissions, or fees paid to nonemployees or any compensation that isn’t on the salary scale for nonemployees.
Information Required to Complete Form 1099
The basic information required on Form 1099-MISC includes name, address, Social Security number, and occupation.
The financial information required on Form 1099-MISC includes the amount paid during the year, whether by check or electronic funds transfer (EFT). The employer must also include their name, address, and federal employer identification number (FEIN). If they don’t have a FEIN because they’re a sole proprietor or partnership with no employees, they can use their Social Security number instead of a FEIN number.
The bottom line on Form 1099-NEC for FSM Businesses
As a field services company owner, it is essential to complete Form 1099-NEC correctly. This is especially true if the business hired freelancers or independent contractors as field technicians. The requirements for completing this form seem like another tax form, but management should understand them. It is beneficial to have a solid understanding of labor laws to fill out Form 1099-NEC. This will ensure that a business and its employees accurately report compensation and associated taxes to the IRS.
A company can file the 1099 forms electronically using third-party providers such as QuickBooks. Zuper supports a simple and highly valuable QuickBooks integration for an effortless experience. Build credibility with employees by creating a culture where paperwork is completed correctly. This will empower the workforce and help the field services teams.