What are the main differences between Form 1099-MISC and Form 1099-NEC?

Form 1099-MISC (Miscellaneous Income)

Form 1099-MISC is used by businesses to report miscellaneous payments made to contractors or individuals, such as:

• Royalties or broker payments of $10 or more
• Payments of $600 or more for:
  • Rents
  • Prizes and awards
  • Other Income
  • Medical and health care payments
  • Crop insurance proceeds
  • Cash payments for fish from a business
  • Payments to attorneys
  • Fishing boat proceeds.

Businesses or individuals who qualify for Form-1099 MISC must fill out the form after the tax year ends to report their payments to the IRS.

Form 1099-NEC (Non-Employee Compensation)

Form 1099-NEC is used to report payments made to non-employees, such as freelancers and contractors. It was re-introduced in 2020, and replaced Form 1099-MISC for this purpose. If your business pays over $600 to an individual or a business for contract work, your business must file this form.

To meet the criteria for non-employee compensation:

• The payment should be made to someone who is not your employee.
• The payment should be for services related to your business.
• The payment can be made to an individual, partnership, estate, or sometimes even a corporation.