• Form 1099-NEC, new as of tax year 2020, is used for reporting payments that previously would have gone into box 3 of Form 1099-MISC.
  • Activities that generate income and offsetting expenses but do not meet the criteria of being for income or profit (for example, coin collecting) are classified by the IRS as a hobby. Any hobby income reported on Form 1099-NEC makes the return out-of-scope.
  • A 1099-NEC issued to an athlete receiving Name, Image and Likeness (NIL) income is out-of-scope.
  • Income in box 1, “Nonemployee compensation,” must be carried by TaxSlayer to a Schedule C. 
    • [Workaround] If this income is not earned income and is not business related, and therefore , but belongs on Schedule 1 Line 8, “Other income”,  then:
    • Enter the amount in Box 3 of a 1099-MISC page, in TaxSlayer, rather than using the 1099-NEC input form, so that it correctly flows to Schedule 1 Line 8z.
      • The section Schedule 1, Line 3 - Business Income on page 57 discusses when Schedule C should be used.
      • Note: In theory, the employer should correct such an error by issuing a 1099-MISC. In practice, it is not worth asking the taxpayer to go back to the employer to get a new tax form.
  • Note for CA state returns: If Box 5 has an amount in it, enter that in TaxSlayer, along with the State (California) and the CA EIN (“Payer’s State No.”). Otherwise, no state information needs to be entered

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