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Letter from the IRS about Form 1099-NEC & Form 1096

Letter from the IRS about Form 1099-NEC & Form 1096
Ines Zemelman, EA
03 December 2020

This time of the year, you may receive an unexpected letter from the IRS advising you may be required to file forms 1099-NEC and 1096.

Why you received this letter

You received this letter because your prior tax return likely included self-employment income showing deduction for contractor labor as a business expense. 

If you hired US contractors then you were required to file the form 1099-MISC to report payments made to independent contractors (non-employees). Starting from the 2020 tax year, those payments will be reported on a new form: Form 1099-NEC.  

Proper documentation for your staff

If you run a business outside of the United States and hire only non-US persons then the form 1099-NEC is not needed. As a matter of precaution, ask people working for you (employees of independent contractors) to complete form W8-BEN to confirm they are not US citizens or green card holders. For those who are US persons, you will be required to file the form 1099-NEC and submit it to the IRS. Form 1096 is the summary attached to multiple forms 1099-MISC if filed on paper and mailed.

If you do not hire US contractors, you can disregard this letter

If your business does hire US contractors then disregard this letter. No need to respond to the IRS to tell them the letter does not apply to you.

 

Ines Zemelman, EA
Founder of TFX