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Home › Tax Forms › 1099 Nec Vs 1099 Misc
WHAT'S THE DIFFERENCE?

Form 1099-NEC and Form 1099-MISC

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Two tax forms instead of one

If you were a freelancer or an independent contractor before 2020, you were probably used to filing Form 1099-MISC for all your earnings. But now, as you probably know, there are two types of forms to report 1099 earnings, the 1099-MISC and the 1099-NEC. Suppose you are newly entering the job market as a self-employed individual or freelancer. In that case, you can probably benefit from a better understanding of the 1099-MISC and the 1099-NEC forms and why they are important when you go to file your taxes after the end of the year. You will get a basic sense in terms of 1099-NEC vs 1099-MISC here.

Table of contents

First, what exactly are these two IRS 1099s?...Read more

What is a 1099-NEC and how is it useful to you?...Read more

First, what exactly are these two IRS 1099s?

In Form 1099-NEC, the NEC stands for Non-Employee Compensations. The MISC in Form 1099-MISC stands for Miscellaneous Income.

History of the two forms

The 1099-MISC changes over the years

What is a 1099-NEC and how is it useful to you?

If you received a 1099-NEC this year, you have to first and foremost understand what's on it.

What does the 1099 NEC report?

Businesses or entities file Form 1099-NEC if they hired you as a contracted or a freelance worker. Only the income payouts you receive from them in a given year are reported, it's not meant for any other payment or compensation. And it doesn't include your estimated taxes.

So who receives 1099-NEC?

Every self-employed individual who is hired by a business or an entity and earns $600 or more in a year for lending their services will receive the 1099-NEC form. Say you are a photographer hired by a magazine, or an industry expert doing consulting work for a new business, or an attorney contracted by a business for a special case. As long as you are not on the employee payroll of the business and have been paid $600 or more for your services to the firm, you will receive a 1099-NEC. You're required to pay self employment taxes on this income. There are four conditions that the IRS lays out for businesses to report such payouts, and you should keep them in mind when you are reviewing the 1099-NEC forms you receive in order to file your income tax return accurately.
Image explaining 1099-NEC reporting criteria. Receive form if paid $600+ as non-employee for business services. Applies to self-employed, freelancers, and some corporations. Taxes.

Watch out for one more condition.

If the business paying you makes a direct sale of $5,000 or more to you during the tax year for something you plan to resell, it needs to be reported on the 1099-NEC form, as well. For instance, say you are a freelance writer with your own book store. A magazine hires you to write a regular column for a year, and during that time, you make a direct purchase of their latest stock of magazines worth $6,500 to sell them in your store. And, since you will ultimately earn income from selling the magazines, the magazine company reports that stock purchase on Form 1099-NEC.

Note:

During your review of a 1099-NEC, also make sure you check whether the business reports your federal income tax withheld by them, if any, regardless of the amount. This falls under the backup withholding rules laid out by the IRS. The 1099-NEC you receive will look like this:
Image contains tax form instructions for nonemployee compensation (1099-NEC) with payer and recipient information, federal income tax, state taxes, and FATCA filing.
Things to watch out for when reviewing this form:
  • Make sure it does not capture your W-2 earnings if you are an employee on a payroll for a business.
  • The form should not highlight any of your personal payments.
  • You should receive the 1099 NEC no later than January 31. If you have not received the form from a hiring business by then, notify the business. If it might lead to you missing the tax filing deadline, you can notify the IRS at your discretion.
  • What to do when you receive Form 1099-NEC As a freelancer who just received Form 1099-NEC, you need to review 4 basic details on the Form 1099-NEC about yourself and the income payouts made to you by your hiring business.
Image with text explaining details on 1099-NEC form for non-employee compensation, including TIN, name, address, social security number, and tax withholdings. #1099 #taxes #freelancer

What is a 1099-MISC and how is it useful to you?

Calculating taxes on Form 1099-NEC and 1099-MISC

1099 G form

The 1099-G form is used to report payments made by governments to individuals. Unemployment compensation should be reported on Schedule 1 (Form 1040).

1099 SA form

The 1099-SA form is an informational form that reports distributions from your health plan. This is filed on Form 8889 or Form 8853 and attached to Form 1040.

Form 1040

This is the most common document in the US tax system. It's the master tax return that every American fills out.

Form 1040 Schedule C

Running a business by yourself? This is the tax return 2022 schedule where you report how much (knock on wood) profit you made or how much you (heaven forbid) lost over the course of the year.

Form 1040 Schedule SE

SE stands for self-employment tax, and this is where people who make a living working for themselves or freelancing pay Social Security and Medicare taxes.

Form 8829

If you use your home for work, you can deduct things like utilities and supplies used for your home office or storage space used for inventory from your taxes. Use this form to figure out how much you can deduct.

Form 1099

If you're self-employed, this is the form that the people who pay you use to report those payments to the IRS. Here's what you need to know about it.

Losing a 1099 form

If you've lost a 1099 that was sent to you, fear not. Here's what you can do if it happens.

Form 1099-NEC

Entities that pay you for services as a freelancer or independent contractor report those payments to the IRS using this 1099 form.

Form 1099-MISC

Entities that give you other forms of income as a freelancer or independent contractor, such as prize money or money for healthcare, report those payments to the IRS using this 1099 form.

Avoid 1099-Misc

There are ways to lower the amount of tax you pay as a 1099 self-employed individual. Here are five proven strategies.

Form 1099-K

If you receive payments of $600 or more as a self-employed individual through credit card companies and payment services like PayPal, they report those payments to the IRS using this 1099 form.

Paypal

Here's how to receive a 1099-K from PayPal and how to use it to file and pay your 1099 taxes.

Shopify

Here's how to receive a 1099-K from Shopify and how to use it to file and pay your 1099 taxes.

Venmo

Here's how to receive a 1099-K from Venmo and how to use it to file and pay your 1099 taxes.

Form 1040-ES

This vital tax form for self-employed individuals and freelancers is how they pay quarterly taxes, which they need to estimate (ES means estimated taxes).

1099 A form

The 1099-A form is received when an owned property has been foreclosed. This form is reported on Schedule D after calculating capital gain or loss.

1099 B form

A 1099-B form is an informational return form for recording the sale of investments by brokerages. This is reported on Form 8949 and Schedule D.

1099 G form

The 1099-G form is used to report payments made by governments to individuals. Unemployment compensation should be reported on Schedule 1 (Form 1040).

1099 SA form

The 1099-SA form is an informational form that reports distributions from your health plan. This is filed on Form 8889 or Form 8853 and attached to Form 1040.

Form 1040

This is the most common document in the US tax system. It's the master tax return that every American fills out.

Form 1040 Schedule C

Running a business by yourself? This is the tax return 2022 schedule where you report how much (knock on wood) profit you made or how much you (heaven forbid) lost over the course of the year.

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