Understanding 1099-MISC vs. 1099-NEC: Which Form Do You Need to File This Tax Season?

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If your business paid freelancers, contractors, or other non-employees for service work this year, you may need to file a 1099 form with the IRS to document your payments. But there’s more than one version of the 1099 (in fact, there are many), and using the wrong one can create issues with the IRS and confusion for the people you paid. 

This article breaks down the key differences between the 1099-MISC and 1099-NEC, the two most common types of 1099 forms businesses use to pay contractors and vendors. We’ll discuss when to use each form, how to stay compliant this tax season, and key information for filing 1099 online. 

Quick Summary: Which 1099 Form Should You File?

Here’s the essential facts you need to know about when to use the 1099-MISC vs. the 1099-NEC:

• Use 1099-NEC if you paid $600 or more to a contractor or freelancer for services.
• Use 1099-MISC if you paid $600 or more for rent, royalties, prizes, or other non-service transactions.
• 1099-NEC is due to the IRS and recipients by January 31.
• 1099-MISC is due to recipients by January 31, and to the IRS by February 28 (paper) or March 31 (e-file).
• Corporations generally don’t receive 1099s, except for attorneys and medical providers.

Anyone who has to file taxes must report all of their income, even if it doesn’t meet the $600 threshold or they don’t receive a 1099 for it. However, all businesses that meet the conditions for issuing a 1099 are required to do so to help ensure that contractors can meet their tax obligations correctly. 

Why the IRS Split the Forms

Before 2020, the 1099-MISC was the default form for reporting contractor payments and other types of business-related income. However, because Box 7 for nonemployee compensation had an earlier due date than the rest of the form, it often led to confusion and late filings.

To streamline the process, the IRS reintroduced the 1099-NEC (Nonemployee Compensation) form starting in tax year 2020. Now, businesses report contractor and freelance service payments on a separate form with its own deadline, while continuing to use the 1099-MISC for everything else.

What Is the 1099-NEC?

The 1099-NEC is specifically used to report payments to nonemployees for services rendered in the course of business. This includes freelancers, gig workers, consultants, and other independent contractors.

You’ll need to file a 1099-NEC if:

• The total payment was $600 or more in a calendar year.
• The payment was for services.
• The person or business you paid is not classified as a corporation (except in specific cases).
• The payment was made in the course of your business—not for personal reasons.

Examples of payments reported on 1099-NEC:

• A freelance web designer you paid $2,000.
• A contractor who repaired your business’s roof for $1,500.
• A self-employed social media manager working for your brand.

If you’re filing a 1099-NEC online, remember that the deadline for filing the 1099-NEC with the IRS is January 31, regardless of whether you file electronically or by mail. You must also provide a copy to the recipient by the same date.

What Is the 1099-MISC?

The 1099-MISC covers a wider range of miscellaneous income types that fall outside of typical service-based payments. You’ll use this form to report various payments of $600 or more and for royalties over $10.

Common payments reported on 1099-MISC include:

• Rent (e.g., equipment rental, office lease)
• Royalties (books, licenses, patents)
• Prizes or awards given as part of a business promotion
• Medical and health care payments
• Some types of legal payments made to attorneys

For instance, if you rent an office space and pay the property owner $12,000 in rent during the year, you’ll need to file a 1099-MISC and send it to the entity you paid rent to. Similarly, if you paid a company $800 in royalties for digital assets used in your advertising, that should also be reported here.

What Happens If You File the Wrong Form?

If you accidentally report a contractor payment on a 1099-MISC when it should have been a 1099-NEC—or vice versa—you’ll need to correct the filing. To do this, follow the IRS instructions for issuing and filing corrected 1099 forms. Make sure to also send corrected copies to the recipients if necessary.

Making timely corrections is critical for avoiding IRS penalties and keeping your records clean. Many bookkeeping software solutions offer built-in tools that make it easy to submit corrected forms. 

E-Filing Your 1099s: What to Know

Starting in 2024, the IRS requires businesses filing 10 or more information returns (including 1099s) to file electronically. E-filing is faster, reduces errors, and provides immediate confirmation of receipt. 

You can e-file for free using the IRS Information Returns Intake System (IRIS) or Filing Information Returns Electronically (FIRE). Note that you might have to apply for a Transmitter Control Code (TCC) from the IRS, which, according to the IRS may take up to 45 days to process. Most bookkeeping software for small businesses also includes easy options for filing your 1099s online.

The deadline to e-file 1099-NEC is January 31. For 1099-MISC, it’s March 31. If you’re under the 10-form threshold, paper filing is still allowed (although paper filing due dates are different, so be sure to check). 

State Requirements

For many businesses, federal filing is only part of the process, as many US states require businesses to submit 1099s to the state government as well. Check the state 1099 filing requirements to learn about obligations in the states where you operate.

Some US states participate in the IRS Combine Federal/State Filing Program (CF/SF), which can send your filed 1099 forms to state governments. This can be a convenient option, and it’s available through many bookkeeping software for small business solutions. However, CF/SF has its own requirements, so verify how it works in your state before you begin. If you’re unsure what your state requires, ask your tax preparer for advice or consult your state’s Department of Revenue. 

Filing 1099 forms correctly is a critical part of tax compliance for small businesses. Knowing which form to use—and submitting it on time—helps you avoid penalties and provides your contractors with the information they need for their own filings. It also helps build trust with the contractors you work with and keeps your business operations running smoothly during tax season and beyond.