QuickBooks 1099 Tax Form Changes at 2020 Year-end

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The IRS has separated Non-employee compensation onto a new form called the 1099-NEC for tax year 2020. The IRS also revised Form 1099-MISC and rearranged several box numbers for reporting income on that form.

As a result, you must update QuickBooks 2019 (or newer… QuickBooks 2020 or QuickBooks 2021) versions (Pro, Premier or Enterprise) to the most recent release in order to have the necessary program changes to accommodate both 1099-MISC and 1099-NEC forms.  You can find out more about the appropriate QuickBooks Release updates (with the necessary 1099 changes) at these Insightful Accountant articles:

QuickBooks 2021 Maintenance Release 4 (R4)

QuickBooks 2020 Maintenance Release 10 (R10)

QuickBooks 2019 Maintenance Release 14 _(R14)

Because the IRS has separated non-employee compensation onto the new 1099-NEC for tax year 2020, and they revised Form 1099-MISC so as to rearrange several box numbers for reporting income, you not only need to have the new forms in your QuickBooks but you will need to adjust how you use the forms.

For the latest information about developments related to Forms 1099-MISC and 1099-NEC and their instructions, such as legislation enacted after they were published, go to IRS.gov/Form1099MISC or IRS.gov/Form1099NEC

IRS Form 1099-NEC (2020)

If in the past you filed 1099-MISC using only Box 7 to report Non-employee Compensation you will most likely now select Box 1 - Non-employee Compensation on the new 1099-NEC form. This is the most common situation that business traditionally reporting Non-employee compensation will encounter and the only box most businesses will need to select for payment types. However, if you have other payment types, then you'll need to file both 1099-NEC and 1099-MISC forms.

Non-employee compensation (Box 1)

Enter non-employee compensation (NEC) of $600 or more. Include fees, commissions, prizes and awards for services performed as a non-employee, other forms of compensation for services performed for your trade or business by an individual who is not your employee, and fish purchases for cash. Include oil and gas payments for a working interest, whether or not services are performed. Also include expenses incurred for the use of an entertainment facility that you treat as compensation to a non-employee. Federal executive agencies that make payments to vendors for services, including payments to corporations, must report the payments in this box. See Instructions for Forms 1099-MISC and 1099-NEC for more specific information on what qualifies, please see page 10 and 11 of the Instructions for Forms 1099-MISC and 1099-NEC

Federal tax withheld on Non-employee compensation (Box 4)

Enter backup withholding. For example, persons who have not furnished their TINs to you are subject to withholding on payments required to be reported in box 1. For more information on backup withholding, including the rate, see part N in the 2020 General Instructions for Certain Information Returns.

IRS Form 1099-MISC (2020)

The IRS revised Form 1099-MISC and rearranged several box numbers for reporting income on that form. Note: some boxes without revisions or revised instructions are not reflected in the content below.

Rents (Box 1)

Enter amounts of $600 or more for all types of rents, such as any of the following.  For more specific information on what qualifies, please see page 4 and 5 of the Instructions for Forms 1099-MISC and 1099-NEC

Other Income (Box 3) 

Enter other income of $600 or more required to be reported on Form 1099-MISC that is not reportable in one of the other boxes on the form.  For more specific information on what qualifies, please see page 5 and page 6 of the Instructions for Forms 1099-MISC and 1099-NEC

Federal tax withheld (Box 4)

Enter backup withholding. For example, persons who have not furnished their TINs to you are subject to withholding on payments required to be reported in box 1. For more information on backup withholding, including the rate, see Instructions for Forms 1099-MISC and 1099-NEC

Fishing Boat Proceeds (Box 5)

Enter the individual's share of all proceeds from the sale of a catch or the FMV of a distribution in kind to each crew member of fishing boats with normally fewer than 10 crew members. A fishing boat has normally fewer than 10 crew members if the average size of the operating crew was fewer than 10 on trips during the preceding 4 calendar quarters.  For more specific information on what qualifies, please see page 6 of the Instructions for Forms 1099-MISC and 1099-NEC.

Medical Payments (Box 6) 

Enter payments of $600 or more made in the course of your trade or business to each physician or other vendor or provider of medical or health care services. Include payments made by medical and health care insurers under health, accident, and sickness insurance programs. If payment is made to a corporation, list the corporation as the recipient rather than the individual providing the services. Payments to persons providing health care services often include charges for injections, drugs, dentures, and similar items. In these cases, the entire payment is subject to information reporting. You are not required to report payments to pharmacies for prescription drugs  For more specific information on what qualifies, please see page 6 of the Instructions for Forms 1099-MISC and 1099-NEC

Direct Sales (Box 7) 

Enter an “X” in the checkbox for sales by you of $5,000 or more of consumer products to a person on a buy-sell, deposit-commission, or other commission basis for resale (by the buyer or any other person) anywhere other than in a permanent retail establishment. Do not enter a dollar amount in this box. The report you must give to the recipient for these direct sales need not be made on the official form. It may be in the form of a letter showing this information along with commissions, prizes, awards, etc.

Substitute Payments in lieu of dividends or interest (Box 8) 

Enter aggregate payments of at least $10 of substitute payments received by a broker for a customer in lieu of dividends or tax-exempt interest as a result of a loan of a customer's securities. Substitute payment means a payment in lieu of (a) a dividend, or (b) tax-exempt interest to the extent that interest (including original issue discount) has accrued while the securities were on loan. For this purpose, a customer includes an individual, trust, estate, partnership, association, company, or corporation.

Crop Insurance Proceeds (Box 9) 

Enter crop insurance proceeds of $600 or more paid to farmers by insurance companies unless the farmer has informed the insurance company that expenses have been capitalized under section 278, 263A, or 447 of Instructions for Forms 1099-MISC and 1099-NEC.

Gross Proceeds Paid to an Attorney (Box 10)

Enter gross proceeds of $600 or more paid to an attorney in connection with legal services (regardless of whether the services are performed for the payer). See Payments to attorneys, earlier.  For more specific information on what qualifies, please see page 2 and 3 of the Instructions for Forms 1099-MISC and 1099-NEC

Excess Golden Parachute (Box 13) 

Enter any excess golden parachute payments. An excess parachute payment is the amount over the base amount (the average annual compensation for services includible in the individual's gross income over the most recent 5 tax years). Find additional detail on page 11 of the Instructions for Forms 1099-MISC and 1099-NEC.