The 411 on the 1099: What You Need to Know

The 411 on the 1099

Ready for a blast from the past?

OK, maybe that description is a bit ambitious, but we think it’s interesting that the government is now bringing back Form 1099-NEC, which was last used back in 1982, during the Reagan administration. For the last few decades, business owners and local government were responsible for using the Form 1099-MISC to report nonemployee compensation. But with the return of Form 1099-NEC, municipalities can say hello to a revamped form. We know it’s been a while since you dusted off your signature 80’s shoulder pads, leg warmers, and Walkman. So, we figured you’d want a refresher on this form as you head into the 2020 tax season. Here’s what you need to know:

You’re familiar with Form 1099-Misc – it’s like a W2 designed to report certain types of compensation to individuals and unincorporated entities based on what the business or municipality has paid them throughout the year. It’s not disappearing, but for the 2020 tax year, payors will no longer report nonemployee compensation, such as payments to independent contractors, on this form. Instead, that’s where Form 1099-NEC comes into play (download it here).

Generally, you’re required to file a Form 1099-NEC if you meet the following conditions:

  • You paid someone who’s not your employee
  • You paid for services during your trade or business
  • You paid an individual, partnership, estate, or corporation (in some cases)
  • You paid at least $600 to the payee during the year

Miscellaneous service payments other than nonemployee compensation should still be reported on Form 1099-MISC. This includes payments of at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest, and payments of at least $600 in:

  • Rents
  • Payments to an attorney (other than fees for services)
  • Section 409A deferrals
  • Nonqualified deferred compensation

There are other categories that are less likely to be applicable to local municipalities, for further clarification, please reference this IRS link.

For 2020, the IRS requires you to furnish the statements to recipients and file Form 1099-NEC on or before January 31, 2021. This differs from the Form 1099-MISC IRS filing deadlines: if you file on paper, you must file Form 1099-MISC by March 1, 2021; if you file electronically, you must file Form 1099-MISC by March 31, 2021. The deadline for furnishing the 1099-MISC to the recipient is the same, January 31, 2021. Determining which form you will need to file depends largely on the agreement or relationship your municipality has with a given recipient. As a best practice, we suggest that municipalities carefully review the IRS requirements for independent contractor status and always get W-9 forms completed before making any payment to a new vendor or independent contractor. This will save tremendous time at year-end and reduce your chances of getting slammed with IRS penalties. As always, if you run into confusion navigating this change, please contact our dedicated team at RBT.


The Right Road to Recruiting

The Right Road to Recruiting

There are defining moments in history that shape generations. Like flashbulb memories, some events crystalize in our brains, and we can recall “where we were” when we heard the news that changed our world. Without a doubt, 2020 has been a sobering experience for every American, regardless of their age or background. But for members of Generation Z (people born from 1995 to 2010) who are just entering the workforce, this year has made an indelible mark on their future career paths, priorities, and what they are looking for in an employer. What does this mean for your business? As construction industry leaders, it’s time you prepare your company to welcome and understand the new priorities, needs, and values of this incoming workforce. Otherwise, a huge employee gap will leave you and your bottom line vulnerable in the years to come.

Stand Out

Salary is important. But if posting paychecks is the extent of your recruiting tactic, think again. Studies show that work-life balance trumps salary alone for Gen Z. On average, 38% of Gen Z members consider work-life balance as their number one factor in choosing an employer. If you aren’t already prioritizing your company culture, it’s time to reassess what makes your business shine. From mental-health days to employee assistance programs, to community activities and more, companies need to be better-rounded if they want to attract dynamic talent. To truly stand out to Gen Z, a heavy emphasis should be placed on opportunities for professional development and the chance to grow with the company, along with an inclusive and collaborative environment. Remember, members of Gen Z want to feel like they are making a difference. If your operation is advertised as a place to clock in and clock out at the end of the day, you’re destined to become an undesirable workplace. A high turnover means heightened costs for you, the employer. For example, replacing a mid-level employee can cost 20% of their annual salary, meaning a $60,000 per year manager can cost about $12,000 to replace. To attract (and retain) talent, build in additional incentives. What impact can your employee expect to make on your community, and how can you help them to advance both personally and professionally? These are the tough questions you need to be able to answer come interview season.

Reach Out

What is your team doing to increase visibility? Communication is key. Utilize social media platforms to allow Gen Z members to consider your company. Not on LinkedIn? Create your company profile today. Not on Facebook or Youtube? Consider adding social channels to showcase the exciting work your crew is accomplishing. Generation Z is known as the first true digital natives – the internet, social networks, and mobile devices have been a part of their reality since day one. If it’s difficult to connect with your business, there are hundreds of other more tech-savvy options out there for recruits to explore at the click of a button. Once you master reaching out digitally, interact in-person (or from a safe, six-feet apart during the pandemic, of course).  Contact local school district leaders and volunteer for virtual or in person career day events at middle schools, high schools, and colleges. Elevate your internship programs or develop a new program so kids can discover the opportunity that awaits them. New data shows that fifty-six percent of interns and 40% of co-op students turned into full-time, entry-level hires in 2019.

Given the industry’s aging workforce and an unprecedented number of retiring owners, contractors need to do everything possible to recruit young employees into the industry. It’s crucial to take the time to methodically map out recruiting efforts before you’re in a desperate hiring predicament. Recruits need to understand that the construction industry doesn’t just offer temporary job placement, but successful, rewarding career paths – and it’s your responsibility to make sure they know that.