Thanks Attorney Mike Melbinger for providing us this update on the new Form 1099-NEC reporting for non-employee compensation, including directors fees, and reporting on the existing Form 1099-MISC for excess golden parachute payments and NQDC amounts that fail to satisfy IRS Code 409A.
…And for guidance on 409A-compliant NQDC options, talk to the team at Fulcrum Partners.
New IRS Form 1099-NEC for Non-Employee Compensation, Including Directors’ Fees
Way back in 2015, the Protecting Americans from Tax Hikes (PATH) Act of 2015 accelerated the due date for filing any Form 1099 that includes nonemployee compensation (NEC) from February 28 to January 31 and eliminated the automatic 30-day extension for forms that include NEC. Rather than having different Form 1099-MISC due dates depending on whether NEC is reported, the IRS created a new Form 1099-NEC beginning with tax year 2020. (Form 1099-MISC still applies to “Miscellaneous Income,” but it has been revised/rearranged in light of Form 1099-NEC.)
Any trade or business must report NEC of $600 or more, including fees, commissions, prizes and awards for services performed as a nonemployee, and other forms of compensation for services performed for the trade or business by an individual who is not an employee, in box 1 on Form 1099-NEC. Companies must report directors’ fees and other remuneration, including payments made after retirement, in box 1 on Form 1099-NEC in the year paid.
According to the instructions, certain amounts that are reported on Form 1099-MISC, such as (1) excess golden parachute payments (box 13 of Form 1099-MISC) and (2) nonqualified deferred compensation (NQDC) amounts (plus earnings) includible in gross income because the NQDC plan fails to satisfy the requirements of Code Sec. 409A (box 14 of Form 1099-MISC) are also reported in box 1 of the 1099-NEC.
A Form 1099-NEC is not required for the Cost of current life insurance protection (report on Form W-2 or Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.) and payments to a tax-exempt organization including tax-exempt trusts (IRAs, HSAs, Archer MSAs, Coverdell ESAs, and ABLE (529A) accounts*).
And don’t forget, if you are in the trade or business of purchasing fish for resale, you must report total cash payments of $600 or more paid during the year to any person who is engaged in the trade or business of catching fish.
*IRAs, (Individual Retirement Accounts) HSAs, (Health Savings Accounts) Archer MSAs, (Archer Medical Savings Accounts, named after Congressman Bill Archer) Coverdell ESAs, (Coverdell Education Savings Accounts named after Senator Paul Coverdell) and ABLE (529A Achieving a Better Life Experience) accounts.
#1099NEC #Non-EmployeeCompensation #BOD #NQDC
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein.
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