There is a new IRS Form 1099-NEC (Non-employee Compensation) for taxpayers to report non-employee compensation paid or received in the course of their trade or business. Starting in tax year 2020, taxpayers must complete this form to report any payment of $600 or more made to a payee in the course of their business. Note, though, there is no requirement to report personal payments; the requirement covers only payments made in the course of your trade or business.
Typically, payers must file Form 1099-NEC by January 31st (note that for 2020 tax returns, the due date is February 1, 2021). There is no automatic 30-day extension to file a Form 1099-NEC, but an extension may be available under certain hardship conditions.
Non-employee compensation may be subject to backup withholding (see below) if either: (a) a payee has not provided a taxpayer identification number (TIN) to the payer; or (b) the IRS notifies the payer that the TIN provided was incorrect.
A Taxpayer Identification Number (TIN) can be one of the following numbers:
Individual taxpayer identification; or
Adoption taxpayer identification.
What is Backup Withholding (BWH)?
If you are a taxpayer receiving certain types of income payments, the IRS requires the person or business paying these payments to report them on an information return (e.g., Forms 1099 or W-2G). The person or business paying you does not generally withhold taxes from these types of payments because it is assumed that you will report and pay taxes on this income when you file your federal income tax return. But there are situations when the payer is required to withhold a certain percentage (currently 24%) of the income to ensure the IRS receives the tax due on this income. This is known as Backup Withholding.
For more information, see the following resources: