Summary

The IRS has reintroduced the 1099-NEC form for tax year 2020. This form is used to report nonemployee compensation and will be used in place of Box 7 on the 1099-MISC form. This article provides information about how this change should be handled by Springbrook users.

What is the 1099-NEC form?

The 1099-NEC form, last used in 1982, has been reintroduced to report nonemployee compensation for tax year 2020. This information was previously reported in Box 7 of the 1099-MISC form. Nonemployee compensation must be reported if all four of the following payment conditions are met:

• The payment was made to someone who is not your employee.
• The payment was made for services in the course of your trade or business.
• The payment was made to an individual, partnership, estate, or, in some cases, a corporation.
• The payment was $600 or more for the year.

The official 1099-NEC form is still being finalized by the IRS, but they have provided a preliminary example on the official IRS 1099-NEC web page.

How is the 1099-NEC form used in Springbrook?

The primary location you will see the new 1099-NEC form is in the Accounts Payable 1099s process. Multiple 1099 Type fields throughout the 1099s process will now include the 1099-NEC option.

The Vendor Maintenance window, accessible from both the Accounts Payable and Inventory Control modules, has also been updated to include the 1099-NEC option as an available 1099 Type.

What do I need to do to ensure compliance with the new IRS requirements?

Springbrook users will need to take two steps to prepare for these changes:

1. Identify all vendors currently marked to receive 1099-MISC Box 7 amounts. Once identified, those vendors must be updated to use the 1099-NEC form and Box 1. It is important to update these vendor records as soon as possible in order to minimize the amount of work required later to update processed invoices. Invoices generated after this change is made will not need to updated via step 2 below.
   • The Query by Example report is an excellent tool for identifying which vendors need to be updated. The following four fields should be included, but you can customize your QBE report to meet your unique needs.
     • Vendor Number
     • Vendor Status - allows you to include only active vendors
     • Default 1099 Box
     • Default 1099 Type - allows you include only 1099-MISC vendors
2. Between now and when you send your 1099s, you will need to use the 1099s Invoices process to update the AP History lines on any invoices that were processed before making the changes in step 1 above. You must update the assigned 1099 type from MISC to NEC and move the data in Box 7 to Box 1. Once updated with the correct 1099 type and Box data, you can generate the 1099s as usual.

Springbrook Support will be setting up recorded training sessions in order to further explain these processes. More information will be shared about these training sessions, as well as any additional 1099-NEC updates, via Springbrook Community at https://success.springbrooksoftware.com/s/.