IRS posts guidance on Form 1099-MISC with NEC in Box 7

The Protecting Americans from Tax Hikes (PATH) Act of 2015 requires Forms 1099-MISC reporting non-employee compensation (NEC) in Box 7 to be filed by January 31. Forms 1099-MISC are due as follows:

  • Reporting NEC, whether filed on paper or electronically: January 31;
  • Not reporting NEC and filed on paper: February 28;
  • Not reporting NEC and filed electronically: March 31.

After January 31, those who submit one or more Forms 1099-MISC reporting NEC together with other Forms 1099-MISC not reporting NEC, the IRS may inadvertently treat all Forms 1099-MISC in that submission as subject to the Code Sec. 6721 penalty for failure to file by January 31, even though many of the forms might not be due until February 28 or March 31 (depending on the filing method). In this case, the IRS may send Notice 972CG, A Penalty is Proposed for Your Information Returns, to which the filer may respond and clarify the content of the submission, indicating the number of Forms 1099-MISC that did not report NEC.

Tax year 2017

The IRS recommends that if any of the Forms 1099-MISC reporting NEC will be filed after the January 31, 2018 due date, the submission of those Forms 1099-MISC should be separate from the submission of any Forms 1099-MISC that do not report NEC.

  • Filing on paper: separate submissions, each with its own Form 1096;
  • Filing electronically: separate transmissions, each with its own Payer “A” Record.

Tax year 2018

Although the above procedure is recommended for returns filed in 2018, it will be required for all Form 1099-MISC submissions filed after January 31, 2019, that include one or more Forms 1099-MISC reporting NEC and one or more Forms 1099-MISC that do not report NEC (a “mixed submission”). Electronic filers should anticipate that the IRS will reject a mixed submission with a single Payer “A” Record after January 31, 2019. If the IRS accepts such a submission, it may send a Notice 972CG, treating all Forms 1099-MISC in that transmission as subject to the Code Sec. 6721 penalty for failure to file by January 31. A mixed submission of paper Forms 1099-MISC under one Form 1096 may also result in a Notice 972CG, treating all Forms 1099-MISC in that submission as subject to the Section 6721 penalty for failure to file by January 31. Filers can furnish each recipient with a single payee statement reporting all Form 1099-MISC payment types. Two separate recipient statements are not required, even if the NEC and non-NEC are reported on two different forms filed with the IRS. Regardless of how filers file with the IRS, the payee statements are required to be furnished by January 31. (https://www.irs.gov/forms-pubs/about-form-1099-misc-miscellaneous-income, December 2017.)

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