Understanding the differences between the two forms, 1099-MISC vs 1099-NEC, is essential for correctly reporting various types of payments. We’re here to outline the differences and give you the information you need to determine which forms to file.
1099-MISC vs 1099-NEC: What’s New?
The IRS made a couple updates to these forms for Tax Year 2025. The 1099-MISC vs 1099-NEC form changes are as follows:
Excess golden parachute payments
This type of payment was moved from Form 1099-MISC to Form 1099-NEC, box 3.
E-filing Form Count Threshold
The IRS reduced the e-filing form count threshold to 10 forms for filings due after January 1, 2024. This is calculated by getting a sum of all forms (across all information returns) to determine your total number of forms.
What is Form 1099-MISC?
Form 1099-MISC is used to report a wide range of miscellaneous payments that don’t fall under nonemployee compensation. This can include rent, prizes and awards, crop insurance proceeds, and a variety of other payment types.
Learn more about determining who should receive a Form 1099-MISC here: Who receives a Form 1099-MISC?
What should be reported as miscellaneous income (MISC)?
The IRS instructs that a 1099-MISC form must be completed each person who, in the previous tax year, has been paid:
File Form 1099-MISC for each person to whom you have paid during the year:
- At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest.
- At least $600 in:
- Rents.
- Prizes and awards.
- Other income payments.
- Medical and health care payments.
- Crop insurance proceeds.
- Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish.
- Generally, the cash paid from a notional principal contract to an individual, partnership, or estate.
- Payments to an attorney.
- Any fishing boat proceeds.
In addition, use Form 1099-MISC to report that you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.
Form 1099-MISC Instructions
Note: Backup withholding amounts must be reported even if the amount of the payment is less than the amount for which an information return is typically required.
Learn more about Form 1099-MISC using our Mastering Form 1099-MISC: The Essential Guide.
What is Form 1099-NEC?
Form 1099-NEC is used to report nonemployee compensation amounts to the IRS. This can be payments made to individuals or businesses that are not your employees, such as independent contractors, freelancers, or outsourced service providers.
Learn more about determining who should receive a form 1099-NEC here: Who receives a Form 1099-NEC?
What should be reported as nonemployee compensation (NEC)?
According to the IRS, if the following four conditions are met, then the payment generally should be reported as NEC.
- The payment was made to someone who is not an employee
- The payment was made for services or other reportable compensation in the course of trade or business
- The payment was made to an individual, partnership, estate, or, in some cases, a corporation
- The payment was made to the payee of at least $600 during the year*
Note: Backup withholding amounts must be reported even if the amount of the payment is less than the amount for which an information return is typically required.
Learn more about Form 1099-NEC using our Mastering Form 1099-NEC: The Essential Guide.
1099-MISC vs 1099-NEC: What are the requirements and deadlines?
Traditionally the 1099-MISC vs 1099-NEC deadlines are as follows:
Please note: If these dates fall on a weekend or federal holiday, then the due date is typically the next business day.
1099-MISC vs 1099-NEC: Filing Options
Can I submit a filing electronically?
E filing is highly encouraged by the IRS because it provides several advantages, including faster submission, quicker processing, and real time status updates.
However, in some cases it is not just optional. If you are filing more than ten forms of either type, you are required to file electronically.
When e-filing your forms, make sure to use an authorized IRS transmitter to ensure the process is accurate and efficient.
Can I submit a paper filing?
Employers may choose to paper file only if their total form count is less than the new 10-form count threshold.
If you’re eligible to paper file and choose to do so, be sure to include a Form 1096. If you have any questions about completing the transmittal form, check out our Mastering Form 1096: The Essential Guide.
You should only include Copy A of the 1099-MISC vs 1099-NEC. Copy A is the red ink copy and blank forms can be ordered from the IRS.
It’s also important to verify where to send your filing when paper filing. This is based on the filer’s address, or specifically their state. The graphic below shows the breakdown:
Can I download these forms as a PDF?
If you are looking to download a copy of the form to distribute to your recipients, then yes, you can download a fillable version of this form from the IRS website. This copy is a PDF that can be completed and printed out to furnish to recipients.
It is important to note that this fillable copy is not sufficient for paper filing. When submitting a paper filing, the forms are scanned by a machine which requires that the form itself meet certain requirements, such as the red ink as mentioned previously. We recommend ordering forms directly from the IRS to ensure that you are submitting the correct type of form.
What are the penalties for not filing or filing late?
If you are required to file these information returns and fail to file by the due date, then you may be subject to the following penalties:
- $60 per information return if you correctly file within 30 days after the due date;
- $130 per information return if you correctly file more than 30 days after the due date but by August 1;
- $340 per information return if you file after August 1 or you do not file required information returns;
There are some exceptions though; You can learn more on the IRS General Instructions.
Penalties add up fast! Our graphic demonstrates how quickly these can add up for a filer that only has 10 forms to send out:
Do I need to file with the state?
Many states have filing and furnishing requirements outside of the federal filing requirements.
If you’re e-filing with the IRS FIRE or IRIS systems and you’re enrolled in the Combined Federal/State Filing Program (CFSF), then any applicable forms will be sent to the corresponding states. However, it’s important to verify requirements and deadlines with your state tax department directly.
How do I make a correction?
Always take the time to review your information prior to filing to ensure accuracy. Double check payment amounts and verify taxpayer information.This minimizes the risk of common errors that can lead to penalties and fines.
But, even with careful review, mistakes happen! If your filing is returned with errors, you can easily make corrections. Some quick tips for corrections:
- Submit your corrections in the same medium that you submitted your original filing (unless the IRS states otherwise).
- When submitting a paper correction, be sure to check the “corrected” box at the top of the form. Include another Form 1096 transmittal with the correcetion as well.
- Send the recipient an updated copy of the corrected form. This ensures that all parties have the updated form.
1099-MISC vs 1099-NEC: Key Takeaways
Understanding when to use Form 1099-MISC vs 1099-NEC helps ensure that each type of payment is reported correctly and submitted on time. By staying aware of the latest updates, filing thresholds, and other requirements, you can avoid common mistakes and reduce your risk of penalties. With the right preparation, meeting your filing obligations will be easy!
If you’re looking for a broken down 1099-MISC vs 1099-NEC guide in a downloadable format, make sure to download our PDF guide.
BoomTax, The Boom Post, and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors prior to engaging in any transaction.
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