These two forms are close enough to be confused and different enough that confusing them creates work. They cover different kinds of payment, they have their own filing dates, and the boundary between them has been redrawn more than once in recent years.
Most errors here are not carelessness. They are somebody applying what was correct a few years ago, because nothing in the process prompts you to check whether the categories have moved.
This sets out what each form covers, how to decide which one a given payment belongs on, how each is filed, and what to do when one has already gone out on the wrong form.
Sending the wrong 1099 form, or missing a filing, can result in IRS penalties starting at $60 per form. This guide explains the difference between Form 1099-NEC and Form 1099-MISC, covers the critical 2026 threshold change under the One Big Beautiful Bill Act, and shows you exactly when to use each form.
Quick Reference: 1099-NEC vs 1099-MISC
| Feature | Detail |
|---|---|
| Form 1099-NEC | Form 1099-MISC |
| Purpose | Reports nonemployee compensation (services) |
| Reports other income: rent, royalties, prizes, attorney fees | |
| Common payers | Businesses paying freelancers, contractors, consultants |
| Businesses paying landlords, publishers, lawyers | |
| 2025 threshold | $600 (payments for 2025 reported in early 2026) |
| $600 for most types; $10 for royalties | |
| 2026 threshold (new) | $2,000 under One Big Beautiful Bill Act |
| $2,000 for most types (royalty threshold unchanged at $10) | |
| IRS filing deadline | February 2, 2026 (same deadline for paper and e-file) |
| February 2, 2026 (recipient); March 2 paper / March 31 e-file (IRS) |
Most of the confusion here comes from people remembering how this worked several years ago rather than reading the current instructions. The categories have moved between these two forms more than once. Check which form covers the payment you actually made, for the year you are reporting on, and ignore what you did last time.
Ankit Sarawagi, CPA, CA, MBA · LinkedInWhat Is Form 1099-NEC?
Form 1099-NEC (Nonemployee Compensation) is filed by businesses to report payments made to non-employees for services performed. The IRS reintroduced this form in 2020, splitting it back out of 1099-MISC after more than 30 years of combined use.
Use 1099-NEC when:
- You paid an independent contractor, freelancer, or consultant
- The payment was for services rendered (not goods or rent)
- The recipient is not your employee
- Payment was made via cash, check, ACH, or bank transfer (not credit card or PayPal Goods & Services, those go on 1099-K)
- Total payments in the calendar year met the applicable threshold
What Is Form 1099-MISC?
Form 1099-MISC (Miscellaneous Information) covers a broader range of non-service payment types:
- Box 1, Rents: payments to landlords for office, warehouse, or equipment rental of $600 or more
- Box 2, Royalties: royalty payments of $10 or more
- Box 3, Other income: prizes and awards to non-employees
- Box 6, Medical and healthcare payments
- Box 10, Gross proceeds paid to attorneys (applies even to incorporated law firms)
- Box 14, Gross proceeds from fish purchased for resale
The 2026 Threshold Change: One Big Beautiful Bill Act
This is the most important 1099 update in years. Under legislation signed in July 2025:
- For payments made in 2025 (reported in early 2026): the old $600 threshold still applies to both 1099-NEC and 1099-MISC
- For payments made on or after January 1, 2026: the threshold rises to $2,000 for 1099-NEC
- The $2,000 threshold will be indexed for inflation each year starting in 2027
- The royalty threshold on 1099-MISC Box 2 remains $10, the OBBBA change does not apply to royalties
- Backup withholding rules are also updated to align with the $2,000 floor
đź’ˇ Pro Tip: Do not retroactively apply the $2,000 threshold to 2025 payments. If you paid a contractor $1,500 in 2025, you still owe them a 1099-NEC for tax year 2025.
Filing Deadlines: 1099-NEC vs 1099-MISC (2026)
| Form | Deadline |
|---|---|
| 1099-NEC, Copy B to recipient | February 2, 2026 |
| 1099-NEC, Copy A to IRS (e-file) | February 2, 2026 |
| 1099-NEC, Copy A to IRS (paper) | February 2, 2026 |
| 1099-MISC, Copy B to recipient | February 2, 2026 |
| 1099-MISC, Copy A to IRS (paper) | March 2, 2026 |
| 1099-MISC, Copy A to IRS (e-file) | March 31, 2026 |
Important: 1099-NEC has the same deadline whether you file paper or electronically (both due February 2). 1099-MISC gives you extra time to file with the IRS, but not the recipient.
How to File 1099-NEC: Step by Step
- Collect a completed Form W-9 from every contractor before you pay them. Do not wait until year-end.
- Add up all payments to that contractor for the calendar year. Compare against the applicable threshold.
- Complete Form 1099-NEC: enter the total in Box 1. Verify the recipient name, address, and TIN match the W-9 exactly.
- Send Copy B to the contractor by the February deadline.
- File Copy A with the IRS. Starting with the 2026 filing season, the IRS's IRIS (Information Returns Intake System) will be the preferred e-file portal.
How to File 1099-MISC: Step by Step
- Identify the payment type and the correct box on the form (Box 1 for rent, Box 2 for royalties, Box 10 for attorney gross proceeds, etc.).
- Collect a W-9 from the recipient if you do not already have one.
- Complete Form 1099-MISC with the payment amount in the correct box.
- Send Copy B to the recipient by the February deadline.
- File Copy A with the IRS by March 2 (paper) or March 31 (e-file).
Common Mistakes That Cost Businesses
- Using 1099-MISC for contractor payments, service payments go on 1099-NEC, not 1099-MISC
- Not collecting W-9s before payment, without a TIN, you may be required to apply 24% backup withholding
- Applying the 2026 $2,000 threshold to 2025 payments, the $600 threshold still governs 2025
- Forgetting the attorney exception, even if a law firm is incorporated (C-corp or S-corp), you must file 1099-MISC for gross proceeds paid to attorneys
- Ignoring the 1099-K overlap, payments via credit card, PayPal (Goods & Services), or Venmo are reported on 1099-K by the processor; do not also file a 1099-NEC for those same payments
- Missing the strict 1099-NEC February deadline, unlike 1099-MISC, 1099-NEC has no extended IRS filing deadline
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Frequently Asked Questions
Do I need a 1099 for payments to corporations?
Generally no, C-corporations and S-corporations are exempt from receiving 1099-NEC. The major exception is attorneys: attorney gross proceeds are always reportable on 1099-MISC regardless of the law firm's entity type.
What happens if I miss the 1099 deadline?
Penalties start at $60 per form if corrected within 30 days, rise to $130 per form from 31 days late through August 1, and reach $330 per form for later filing or intentional disregard.
Is PayPal payment reportable on 1099-NEC?
No. Payments made via PayPal Goods & Services, Venmo, credit card, or any third-party payment processor are reported by the processor on Form 1099-K, not by you on 1099-NEC. Check the payment method before issuing any 1099.
Do I file 1099s for foreign contractors?
Generally no, foreign persons or entities performing services outside the US are not subject to US information reporting on 1099-NEC. However, collect a Form W-8BEN (individuals) or W-8BEN-E (entities) from foreign contractors to document their status and protect yourself from backup withholding liability.
What do we do if we used the wrong form?
Correct it rather than leave it, and do it as soon as you notice. There is an established correction process for a form already filed, and using it is considerably better than hoping the two filings are never compared. Tell the recipient as well, because they may have already used the original figure, and a correction they hear about from you is a different conversation from one they discover themselves.
Written by
Ankit Sarawagi, CPA, CA, MBA
Ankit leads the finance team at Profitjets, where he has worked with 500+ businesses across the US on bookkeeping, tax and CFO-level strategy. He writes about the habits that keep small business books accurate all year. Connect on LinkedIn
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