First, a little background: The IRS has reintroduced the 1099-NEC tax form for reporting nonemployee compensation paid during the 2020 tax year. Prior to the reintroduction of the 1099-NEC, these payments were reporting on the 1099-MISC form. For details on the new form and why it was introduced, see this article for a brief, but informative, overview. (The short answer is that the IRS is separating nonemployee compensation reporting and putting it on the 1099-NEC for reasons of timing: the PATH Act moved the filing deadline for nonemployee compensation up to January 31st, so those payments must be filed earlier than other payments that will continue to be reported on the 1099-MISC.)
If you use Sage 100 and you pay people for services who are not employees, you’ll need to file the 1099-NEC form for tax year 2020. According to the CPA Practice Advisor, the form will be used to report payments to consultants (attorneys, architects, and accountants, for example), as well as nonemployee sales commissions. It will also be necessary for businesses using the services of “gig economy” workers, like ride sharing companies or food delivery services if these workers are classified as independent contractors.
Now that we have that background out of the way, let’s move on to understanding what this means in your Sage 100cloud system.
Nonemployee Compensation for Form 1099-NEC added in Sage 100cloud version 2020
With the 2020 version of Sage 100cloud (released in March of 2020) Sage made changes to the software to accommodate the 1099-NEC tax form, and to adjust the data that flows through to the 1099-MISC form. Then, the 2020.1 release added the ability to select Nonemployee Compensation from the Form Type list for 1099 Form Tax Reporting.
In the Sage 100cloud 2020 release, Nonemployee Compensation (to be used for Form 1099-NEC) is available to be selected in the following locations:
- Vendor Maintenance — Default Form field on Additional tab
- 1099 Payment History window — 1099 Form Type field
- A/P Invoice Data Entry — (1099 Payment) Form field on the Header tab
- Manual Check and Payment Entry — 1099 Form field on the Lines tab
Changes were also made to Form-1099 MISC. Included in the changes: Box 7 is now used for the ‘Payer Made Direct Sales of $5,000 or More’ check box. (For more details on the form changes, see the IRS website: www.irs.gov/instructions/i1099msc.) In Vendor Maintenance, the Misc Box 9 check box has been renamed ‘Payer Made Direct Sales $5000+’. This check box is now used for Box 7 on Form 1099-MISC.
What versions of Sage 100cloud have Form 1099-NEC in Form 1099 Tax Reporting?
Nonemployee Compensation (for Form 1099-NEC) has been added to the Form Type list in Form 1099 Tax Reporting as of version 2020.1, and was also added to version 2019.4, and version 2018.10.
What if I already used the 1099-MISC box 7 for 2020 data? How can I move it to 1099-NEC box 1?
If you’ve already recorded nonemployee compensation for tax year 2020 in Box 7, a utility is available to move the totals to Box 1. Please contact Kissinger for help with the utility, or to ask any other questions.