1099-NEC vs. 1099-MISC: Do You Need to File Both?

Form 1099-NEC reports payments to independent contractors and other nonemployees. Form 1099-MISC covers miscellaneous income like rent, royalties, and prizes. If your business made payments in both categories during the year, you may need to file both forms — they're not interchangeable.

A 1099 form is an IRS information return used to report income paid outside of regular employment. Businesses file 1099s to tell the IRS — and the recipient — about payments that weren't subject to payroll withholding. There are more than a dozen types of 1099 forms; the two most common for small business owners are Form 1099-NEC and Form 1099-MISC.

The IRS uses these forms to cross-check what recipients report on their own tax returns. If you paid someone and didn't file the right 1099, the IRS may not have a record of that income — which can create problems for both you and the person you paid.

Form 1099-NEC is the IRS form used to report nonemployee compensation — payments made to independent contractors, freelancers, consultants, and other self-employed workers for services they performed for your business. File one for each person you paid $600 or more during the tax year.

The IRS reintroduced Form 1099-NEC for tax year 2020 after retiring it in 1982. Before that, businesses reported contractor payments on Form 1099-MISC, which created confusion because the two types of payments had different filing deadlines. Separating them onto their own form fixed that problem.

The deadline to file Form 1099-NEC — and to send a copy to the recipient — is January 31, whether you file on paper or electronically.

• Use it for: payments to independent contractors, freelancers, consultants, and other self-employed workers for services
• Filing threshold: $600 or more paid to a single person during the tax year
• Deadline: January 31 (paper and electronic)
• Key box: Box 1 — nonemployee compensation

Form 1099-MISC is the IRS form used to report miscellaneous income — payments that don't qualify as nonemployee compensation and aren't covered by other 1099 forms. Do not use it to report contractor payments; those go on Form 1099-NEC.

The most common payments reported on Form 1099-MISC are rent and royalties. The IRS publishes a full list of what belongs on this form, but the categories that come up most often for small business owners are below.

• Rent: $600 or more paid to a landlord (not through a real estate agent or property manager)
• Royalties: $10 or more
• Prizes and awards: $600 or more
• Medical and health care payments: $600 or more
• Gross proceeds paid to an attorney: $600 or more
• Other income payments: $600 or more

The deadline to file Form 1099-MISC on paper is February 28. If you file electronically, the deadline extends to March 31.

It depends on what kinds of payments your business made during the year. If you paid a contractor $600 or more for services and also paid $600 or more in rent, you need to file both Form 1099-NEC and Form 1099-MISC. The forms cover different payment types and can't substitute for each other.

You can also file both forms for the same payee if you made payments to them in both categories — for example, a contractor you also paid rent to. Each form covers its own payment type regardless of who received the money.

Most small business owners who hire contractors will file at least Form 1099-NEC. Whether you also need Form 1099-MISC depends on whether you made any of the miscellaneous payments listed above. A tax professional can help you figure out which forms apply to your situation.

The simplest way to keep these straight: NEC stands for Nonemployee Compensation, and MISC stands for Miscellaneous. If the payment was for services, it's NEC. If it was for something else — rent, royalties, prizes — it's MISC. The forms themselves tell you what goes in each box.

Form 1096 is a cover sheet the IRS requires when you file paper 1099 forms by mail. Its official name is the Annual Summary and Transmittal of U.S. Information Returns. It summarizes the 1099-NEC and 1099-MISC forms you're sending and tells the IRS how many forms are included.

If you file electronically through the IRS FIRE system or an approved e-file provider, you don't need Form 1096. It's only required for paper filings.