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2020 Tax Letter to Clients

December 16, 2020

Dear Client, Now, as year-end approaches, is a good time to think about planning moves that may help lower your tax bill for this year and possibly next. Year-end planning for 2020 takes place during the COVID-19 pandemic, which in...

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NEW CAYMAN ISLAND INVESTMENT FUND LEGISLATION – IMMEDIATE EFFECTS

April 17, 2020

Changes to Cayman Investment Funds  Classified as Private Funds and Mutual Funds  Overview: The Cayman Islands Government Ministry of Financial Services and Home Affairs, together with other associated authorities (in particular, the Cayman Islands Monetary Authority “CIMA”) has notified the financial services industry of several pending changes to the regulation...

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TAX FILING & PAYMENT DEADLINE POSTPONED

March 23, 2020

The Treasury Department and IRS announced on March 21, 2020 that the federal income tax filing due date has been extended by Presidential signature of the Families First Coronavirus Response Act (H.R. 6201). The due date of April 15, 2020...

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Cryptocurrency Transactions – New IRS Guidelines

October 17, 2019

The Internal Revenue Service (IRS) has issued new guidance for taxpayers engaging in transactions involving cryptocurrency.  The recent IRS Revenue Ruling 2019-24 focuses on the tax treatment of a cryptocurrency hard fork.  In addition, the FAQs on Virtual Currency Transactions...

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Tracking Your Success

August 1, 2019

Investment performance tables and charts are an excellent way to track and showcase the success of your managed accounts and/or fund. Having a performance examination done on your monthly, annual and cumulative returns and comparing them to your benchmark provides...

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Ancillary Tax Services

July 9, 2019

Spicer Jeffries’ tax department prepares tax documents for individuals and entities across the United States, in the Cayman Islands, and around the globe.  Our client base spans numerous business segments and Spicer Jeffries understands that our client's businesses and private...

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Emerging Manager Solution

August 9, 2019

Spicer Jeffries’ partners have been involved with newly launched hedge and commodity funds, both registered and unregistered, as well as private equity funds and mutual funds, since the mid- 1980s. With years of previous accounting work experiences between them, and...

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Three New Legislation Items for Fund Manager

May 9, 2019

Spicer Jeffries wants our clients to be aware of the following legislation that has direct effects on Fund Managers: 1. CARRIED INTEREST - Incentive Allocation New Holding Period Requirement In general, the receipt of a capital interest for services provided to...

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Spicer Jeffries Sponsors “Cryptocurrency Expert Panel”

August 15, 2018

Spicer Jeffries hosted a "Cryptocurrency Expert Panel" for the Palm Beach Hedge Fund Association (PBHFA) in March 2018 March 25, 2018 - A PBHFA staff member wrote: Our March 22, meet & greet, deal-making social was a tremendous success!  Our...

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Spicer Jeffries LLP Ranks Among Top 10 Hedge Fund Auditors

August 10, 2019

SJ is proud to be ranked among the Top 10 Hedge Fund Auditors by the HedgeFund Alert.  For seven consecutive years, 2014 through 2020, Spicer Jeffries has continued its dedication to the securities industry and the Alternative Investment space.  These rankings...

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IRS REVIVES FORM 1099-NEC: Filing Begins With 2020 Tax Year

As a reminder, the IRS made changes to the 1099-MISC form by reviving the Form 1099-NEC.  Beginning with the 2020 tax year the new 1099-NEC form will be used for reporting nonemployee compensation (NEC) payments.  These payments were previously reported on Form 1099-MISC box 7 and will now be reported in Box 1 of Form 1099-NEC.

There are several parts of the new 1099-NEC form to take note of.

  • Box 1 is where you key in the dollar amount of nonemployee compensation.
  • Box 4 is used for any amount you held back to comply with backup withholding requirements.
  • Boxes 5-7 are used to report any state withholding.

What is nonemployee compensation?

The IRS defines nonemployee compensation (NEC) in the 2020 Instructions for Forms 1099-MISC and 1099-NEC.  If the following four conditions are met, you must generally report a payment as NEC. You made the payment to someone who is not your employee.

  • You made the payment for services in the course of your trade or business (including government agencies and nonprofit organizations).
  • You made the payment to an individual, partnership, estate, or, in some cases, a corporation.
  • You made payments to the payee of at least $600 during the year.

Examples of nonemployee compensation that are now reported in box 1 of Form 1099-NEC include:

  • Professional service fees, such as fees to attorneys (including corporations), accountants, architects, contractors, engineers, etc.
  • Payment for services, including payment for parts or materials used to perform the services if supplying the parts or materials was incidental to providing the service.
  • Director’s fees and other remuneration

Form 1099-NEC Other payments

In addition to nonemployee compensation, there are some other payments reported in box 1 of Form 1099-NEC.

  • Prizes and awards for services performed by nonemployees
  • Cash payments for fish
  • Payments by a federal executive agency for services
  • Gross oil and gas payments for a working interest
  • Taxable fringe benefits for nonemployees

You must also file Form 1099-NEC for each person from whom you have withheld any federal income tax (report in box 4) under the backup withholding rules regardless of the amount of the payment.

Form 1099-NEC filing date? 

Form 1099-NEC should be filed with the IRS on paper or electronically by January 31st of each year (February 1st in 2021).  A copy of Form 1099-NEC should also be sent to your vendors and independent contractors by January 31st of each year (February 1st in 2021)  There is no automatic extension available for the 1099-NEC form. The PATH Act, P.L. 114-113, Div. Q, sec. 201, accelerated the due date for filing Form 1099 that includes nonemployee compensation (NEC) from February 28 to January 31 and eliminated the automatic 30-day extension for forms that include NEC. Beginning with tax year 2020, use Form 1099-NEC to report nonemployee compensation.