If you’re a small business owner who works with freelancers, landlords, or other vendors, you’ve probably heard of 1099 forms. But which one do you need — 1099-NEC or 1099-MISC? Choosing the wrong one could put you in the hot seat, with IRS penalties ranging from $60 to $340 per returned form. The good news? Avoiding mishaps is easy with a little planning, and it’s something every business can do.
What you’ll learn
What you’ll learn
Updated: August 6, 2025
Key takeaways
- Use Form 1099-NEC to report payments for services from nonemployees, such as freelancers or contractors
- Use Form 1099-MISC for other payments, such as rent, prizes, and legal settlements, not related to services
- Understand the compliance requirements and IRS deadlines for 1099 forms to avoid costly penalties
Being clear about each form’s purpose, when to use them, and how to file accurately will keep you compliant with Uncle Sam. From deadlines to common mistakes, the following info covers the ins and outs of 1099-NEC vs. 1099-MISC. Let’s dive in!
Understanding 1099 forms
Simply put, filing the right 1099 form helps keep your business in good standing with the IRS. During this process, it’s important to understand the purpose and reporting use for Form 1099-NEC vs. 1099-MISC. These forms report income paid to nonemployees and vendors, and you’re legally responsible for submitting them when required.
What is a 1099 NEC vs MISC?
There are many types of 1099 forms, but the two that pop up most often for small business owners are 1099-NEC and 1099-MISC. Each form reports different kinds of income, and choosing the wrong one can cause confusion for recipients and even draw attention from Uncle Sam.
- Form 1099-NEC is used to report payments to non-employee workers, such as contactors, freelancers, or gig workers. Basically, anyone you hire to perform a task who is not an employee.
- Form 1099-MISC is used to report non-service payments related to rent, prizes and awards, royalties, medical payments, other income payments, etc.
The IRS uses these forms to match what payees report on their taxes with what you reported paying them. Failing to file the right form or filing late can lead to costly penalties and fines.
Form 1099-NEC: Nonemployee compensation
First, let’s navigate Form 1099-NEC, which is used to report payments for services provided by people who aren’t your employees. Whether you’re paying a sole proprietor or a small business, this tax form applies when compensation doesn’t go through payroll.
What counts as nonemployee compensation?
Nonemployee compensation includes payments of $600 or more to a person or business that:
- Isn’t on your payroll
- Performed a service for you
- Received payment by cash, check, or bank transfer
Examples include:
- A contractor hired to fix equipment
- A freelance web designer you paid for a new website
- A consultant who helped improve your operations
If you’re paying someone for services and they aren’t on your payroll, chances are you’ll need to file Form 1099-NEC and send them a copy.
Next, let’s tackle Form 1099-MISC.
Form 1099-MISC: Miscellaneous income
While Form 1099-NEC handles non-employee services, 1099-MISC is used for reporting non-service-related income.
What is reported on 1099-MISC?
You’ll use Form 1099-MISC to report at least $600 in payments such as:
- Rent: For office space, warehouse space, or equipment rentals
- Prizes and awards: Given as part of a promotion or incentive
- Legal settlements: Certain lawsuit settlements and damages
- Medical and health care payments: Payments made to doctors or clinics
Note that credit card payments don’t go on this form. They’re reported separately by your payment processor on Form 1099-K. For a comprehensive list of payments reported on Form 1099-MISC, click here.
Differences between Form 1099-NEC and 1099-MISC
When comparing 1099-NEC vs. 1099-MISC, the biggest difference between the two forms is what you’re reporting.
Form 1099-NEC is only for non-employee compensation. If you’re paying someone for their services and they’re not on your payroll, this is the form to use. These payments are generally subject to self-employment tax.
Form 1099-MISC covers a broader range of miscellaneous income that is usually not subject to self-employment tax.
Filing deadlines and requirements
The filing deadlines for these forms are different and important to track when figuring out when to use 1099-MISC vs. NEC.
Form 1099-NEC due dates:
- Send to recipients: By January 31
- File with IRS (paper or electronic): By January 31
Form 1099-MISC due dates:
- Send to recipients: By January 31
- File with IRS (paper): By February 28
- File with IRS (electronic): By March 31
Getting the deadlines wrong or submitting the incorrect form can lead to pesky (and easily avoidable) penalties of up to $340 per form.
What if I accidentally filed 1099-MISC instead of 1099-NEC?
“If you accidentally filed a Form 1099-MISC when you should’ve filed a 1099-NEC, you should file a corrected 1099-NEC as soon as possible to avoid penalties or fines from the IRS. Be sure to mark the corrected Form 1099-NEC as ‘Corrected’ by checking the box at the top of the form, and send it to both the IRS and the recipient.”
— David Kindness, CPA and OnPay contributor
Tips for accurate 1099 filing
A big part of getting 1099-NEC vs. 1099-MISC right is accurate filing and avoiding common mistakes. Knowing how to fill out a 1099 form and double-checking the information entered will make things go smoothly.
These best practices can help you avoid costly errors:
- Collect Form W-9 before you pay anyone: This form is where you’ll find your payee’s correct name, address, and Taxpayer Identification Number (TIN).
- Match names and TINs: You can use the IRS TIN Matching tool to verify payee information.
- Track payments accurately: Keep your books updated monthly so you’re not scrambling at year-end.
- Review payment types: Misreporting compensation on the wrong form is one of the most common mistakes.
- Use e-file platforms: Electronic filing is faster, reduces errors, and gives you a digital receipt.
Be sure to keep copies of Form 1099-NEC, 1099-MISC, and any related documents for your records in case of an IRS audit.
Simple-to-use services
“OnPay was easy to set up and very flexible. We have full-time, part-time employees as well as 1099 contractors, and their services help us handle everyone’s pay needs very easily. Direct deposit feature is very popular and their reporting functions are terrific. I also appreciate their online chat option to get specific questions answered quickly.”
— Anne Phillips, The Edge Theater
Key steps to ensure compliance
Whether you’re managing independent contractor payments or preparing employee benefits, staying compliant with reporting is key.
The following steps can make things easier during tax season:
- Maintain accurate records with accounting software or a bookkeeper.
- Verify vendor info early — double-check all names, addresses, and TINs.
- Choose the correct 1099 form based on who was paid. If you’re still unsure about 1099-NEC vs. 1099-MISC differences, refer to the official IRS website or speak with a tax professional.
- File on time — put the IRS deadlines on your calendar. If you’re sending a paper form, be sure it’s postmarked by the due date, not the next business day.
- Use trusted e-file services to submit forms securely and avoid mailing delays.
- Check all employee and contractor info before you print W-2s and 1099s for employees. If you’re not sure how to check employee info before W-2 printing, consider using payroll software or working with a bookkeeper.
When you have a clear understanding of 1099-NEC vs. 1099-MISC, you’re in a better position to handle tax season with confidence and avoid costly mistakes.
Making the right choice: Final steps for employers
Choosing between Form 1099-NEC vs. 1099-MISC doesn’t have to be like solving a riddle. It all comes down to the type of payment you made.
- Was it for services from someone not on your payroll? Go with 1099-NEC.
- Was it for rent, prize money, or another non-service payment? 1099-MISC is likely the right fit.
When in doubt, revisit the 1099-NEC vs. 1099-MISC guidelines and consult the IRS instructions. Filing the right form saves you time, avoids confusion for the recipient, and reduces the chance of IRS scrutiny.
If you’re looking for an easy way to handle payroll and tax reporting, OnPay offers tools that help small businesses like yours stay organized and compliant. Learn more at OnPay.
Take a tour to see how easy payroll can be.
Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.