The 1099-NEC is back on production for 2021.
“What do you mean ‘back?'” you say. “I thought this was a brand-new version of the 1099 the IRS invented for torturing production accountants, something akin to a bundle of sticks.”
We can assure you, the 1099-NEC is an oldie – last used circa 1982 – and maybe even a goodie for film and TV production accountants. See, its resurrection was intended to give you an extra month to get your all your other 1099 production expense reporting done, as the due date for the 1099-MISC has been pushed back a month.
Previously, non-employee compensation was jammed into Box 7 of the 1099-MISC and the whole thing was due on the last day of January, making for a real Jan-scramble for production accountants each year. Going forward, the 1099-NEC alone will be due at that time, while the 1099-MISC won’t be due to the IRS until the last day of February (okay, February 1 and March 1 respectively for 2021, because Sundays).
Keep in mind though, you still need to get all your 1099-MISC forms to your production vendors by February 1 – just that you have until March 1 to actually file them with the IRS.
What production costs go on the 1099-NEC?
The “NEC” part of the 1099-NEC stands for “non-employee compensation.” So what qualifies as non-employee compensation on production? The criteria listed by the Society of Human Resource Management denote payments totaling at least $600 in a tax year to:
- Someone who is not your employee.
- For services rendered in the course of your production company trade or business (includes government agencies and nonprofits).
- Payee could be an individual, a partnership, an estate or, in some cases, a corporation.
These could be attorneys, general accountants (not your production accountants of course!), other service providers – as long as they provided services unrelated to your normal production business. (Film crew and cast generally need to be paid as employees, even if they only work for a day – although the guidelines for paying your film and TV crew can vary by state, many states lean toward paying the crew as employees rather than independent contractors.)
For the rest of your miscellaneous AP expenses to vendors on production, you’ll continue to use – you’re way ahead of us here – the 1099-MISC. Examples from our friends at SHRM include rents, prizes and awards, medical and healthcare payments, and fishing boat expenses (you know how many of THOSE get racked up on production! Can we call this the Jaws clause? No? Okay).
Important: the 1099-MISC is also where you would still report payouts for kit rentals to your production crew, because even if they were run through payroll, they are fees rather than actual work wages, so they need to be separated out from the W-2. In our experience, most production accountants find it convenient to run their kit rentals through their production payroll service, but they could be paid separately if the production company wants to issue their own 1099-MISC forms on these.
When you payroll with Media Services, if you have kit rentals totaling $600 or more for a crew employee in a given year, we send the crew member a 1099-MISC in addition to their W-2. This will remain the same for 2021 (tax year 2020), as kit rentals do not go on a 1099-NEC.
Media Services will issue the 1099-NEC on behalf of clients only for valid loanouts that we’ve paid on production throughout the year. Applies to:
- LLCs that receive compensation totaling $600 or more in the tax year
- Corporations (C or S chapter) receiving compensation that is subject to state income withholding when the state requires the use of Form 1099-NEC to substantiate the withholding
Bottom line is: while having another form to fill out isn’t the most fun, separating out non-employee compensation into the headliner on the 1099-NEC will give you more time to get your 1099-MISC filed for your production company.
If you are paying your film, TV or new media crew as independent contractors – with all the risks of penalties, back taxes and workers’ comp liability that goes with that – just be aware that the 1099-NEC will make any misclassification of employees as contractors easier to spot, as it becomes kind of the “star of the show” on the 1099-NEC.
Need help sorting this out? Talk to us.