Form 1099-NEC Filing Requirements, Including California and Oregon

In prior years, if you were paying for the services of someone who wasn’t an employee — like a freelancer or contractor — you were required to file a Form 1099-MISC to report these payments.

Starting with the 2020 tax year, those payments are no longer reported on a Form 1099-MISC. Instead, Form 1099-NEC is being used to report non-employee compensation. Other types of payments historically reported on a Form 1099-Misc are still reported on that form. The new Form 1099-NEC is an important change that comes with heavy penalties for non-filing. We outlined the basics to help you file on time and avoid fines.

You’re required to file Form 1099-NEC if in 2020 your business paid $600 or more:

• For services to a person who isn’t your employee
• Payments to attorneys, whether the attorney is an individual, partnership, or corporation

You’ll also need to file a Form 1099-NEC for any person you withheld federal income tax related to backup withholding, regardless if the total payments were over $600.

There are two copies of Form 1099-NEC. Copy A is filed with the IRS, and Copy B is the form provided to the contractor.

The due date for filing the 1099-NEC with the IRS and providing a copy to the contractor is January 31 of the following year. If that date falls on a weekend or holiday, the due date is the next business day. In 2021, January 31 falls on a Sunday, so 2020 1099-NEC forms are due February 1, 2021.

There is no automatic 30-day extension to file the form, but an extension may be available in certain hardship situations.

Unlike other 1099 filings, California requires that 1099-NECs are filed directly with the Franchise Tax Board (FTB), in addition to the IRS. The due date for filing with the FTB is February 28, 2021 for paper submissions and March 31, 2021 for electronic submissions.

Businesses that need to file 250 or more information returns must file electronically using the Secure Web Internet File Transfer (SWIFT). For filing 249 or fewer information returns, businesses can choose to file by paper or online using the SWIFT system.

The state of Oregon continues to require that all 1099s are filed directly with the state through the online portal, iWire, when the recipient has an Oregon address. The deadline for filing a Form 1099-NEC is January 31, 2021. Don’t miss this date — a penalty of up to $25,000 can be assessed for not filing electronically, not filing the correct information, or filing late.

This is the first year that your business needs to file a Form 1099-NEC, and you might have questions about the process. Aldrich is here to help you navigate this change correctly. If you need more information, please contact your Aldrich Advisor.