Grubhub recently sent an email out to contractors notifying them of the new 1099-NEC form that would be used to report income. Why is Grubhub changing their 1099's from 1099-MISC to 1099-NEC and what will this mean for independent contractors?
What about Doordash, Uber Eats, Postmates, Instacart, Shipt and any others who use the 1099-Misc. Will they follow suit?
Why is Grubhub changing to the 1099-NEC from 1099-MISC?
What it boils down to is, they don't have a choice.
The IRS has changed up their forms for reporting non-employee compensation, which is the category that involves independent contractors for Grubhub and others.
Until last year, Grubhub was reporting income on form 1099-MISC. However, this year the IRS has changed the 1099-MISC form so that it no longer has a space for Non employee compensation.
Instead, they pulled the 1099-NEC (which stands for non employee compensation) out of the mothballs to use for reporting independent contractor payments. The 1099-NEC was last used in 1982.
In years following, they determined it made sense to make a spot on form 1099-MISC for non employee compensation. It made sense, why have several different forms for reporting various types of information?
What does this mean will change for those of us who are independent contractors for Grubhub?
It's just a different form. The same thing is reported, and it's still considered “non-employee compensation.”
Your taxes will not change as a result of this move. You still treat this like you would have last year on your 1099-MISC.
I'd love to get all sensational and suck people in with headlines about “Major Tax Changes” like I've seen on Youtube. There's a problem with that:
It's not major.
It's not a tax change.
This is only a different form with different letters at the end.
Will Doordash, Uber Eats, Lyft, Instacart, Postmates, Shipt and others also move to the 1099-NEC?
If they used the 1099-MISC, they don't have any choice.
That's because the 1099-MISC will no longer have a place to list non employee compensation. The only form that will would be the 1099-NEC.
This isn't about anyone following Grubhub's lead. Grubhub isn't taking any kind of lead here other than they're the first ones I know of to say anything about this.
The only ones who would not be switching to a 1099-NEC form would be platforms like Uber, Uber Eats, Lyft and any others that used a 1099-K.
Companies that use the 1099-K use it because they're creating a façade where it looks like the customer is paying you directly. The 1099-K is used by payment processors like Stripe and Paypal to report when someone's sold more than $20,000 in goods or services in a year. In using it they're claiming they're not the ones compensating you, the customer is.
Uber and Lyft may still provide a 1099-NEC when they pay for some incentives or referral fees equalling more than $600. In those instances, they will use the 1099-NEC this year instead of the 1099-MISC.
Why is the IRS changing up the forms now?
Back in 1982, it made sense to simplify things and use one form instead of two. When that happened the 1099-NEC was retired.
Why bring it back? Isn't it a waste of time for everyone involved to deal with different forms again?
It's all related to due dates and computers and maybe a touch of IRS just liking to complicate things more than simplifying them.
There are several types of income that are reported on a 1099-MISC. Gambling winnings, royalties, prizes, and some other benefits are all reported on that form.
The deadline for companies to report the other forms of income is in February or March. However, they have to report non employee compensation by January 31. As ComplyExchange explains it, the IRS computers had trouble processing multiple 1099 forms if there was a mix of compensation types.
Since the Non Employee Compensation was the only one due on January 31, it just made sense to resurrect the old 1099-NEC.
Should we do anything different as Grubhub independent contractors now that they changed to the 1099-NEC?
Nothing changes. You only get your information on a slightly different form.
That doesn't mean that you might not have to do anything differently.
If you're not doing those things, then yes, you should be doing things differently. But it's not because of a change in what form happens.
But as far as the change from 1099-MISC to 1099-NEC? THAT won't mean that you have to do anything differently.