How do you know who needs a 1099 and who doesn’t? Or whether they need a 1099-MISC or a 1099-NEC? And how do you fill them out to be sure you’ve given the IRS everything required? Here’s what you need to know about Forms 1099-MISC and 1099-NEC.
If you’ve paid an independent contractor for goods or services during the year, you will most likely need to send them a 1099-NEC while also reporting their income to the IRS at the beginning of next year. There are other non-employee workers who are not contractors, and who will need a 1099-MISC. We’ll go into this a little later.
Key takeaways
- The OBBBA raised the reporting threshold for Form 1099-NEC and most 1099-MISC payments from $600 to $2,000 starting in the 2026 tax year, while the $600 threshold still applies to 2025 payments.
- Both forms now include dedicated boxes for cash tips and qualified overtime compensation eligible for OBBBA deductions, shifting standard nonemployee compensation on Form 1099-NEC from Box 1 to Box 1a.
- Reporting cash tips requires entering a three-digit Treasury Tipped Occupation Code (TTOC), using code “000” if the reported tips do not qualify for the OBBBA deduction.
- Form 1099-NEC is due to recipients and the IRS by January 31, whereas Form 1099-MISC must be furnished to recipients by January 31 and filed with the IRS by February 28 for paper returns or March 31 for electronic returns.
If you’ve paid an independent contractor for services during the year, you will most likely need to send them a 1099-NEC while also reporting their income to the IRS at the beginning of next year. There are other non-employee workers who are not contractors, and who will need a 1099-MISC. We’ll go into this a little later.
Prefer video content instead? OnPay subject matter expert and certified public accountant, Noel Lorenzana, explains what each form is used for.
Here’s a closer look at both forms, including who needs to file, which one applies to you, and how to fill them out correctly.
What’s new on the 2026 Form 1099-NEC and 1099-MISC
The IRS finalized the 2026 Form 1099-NEC and Form 1099-MISC, along with instructions for filling them out. These updates reflect two significant changes under the One Big Beautiful Bill Act (OBBBA): a higher reporting threshold and new boxes for tips and overtime. Here’s a breakdown of what changed:
- Higher reporting threshold: The OBBBA raised the threshold for issuing Form 1099-NEC and most Form 1099-MISC payments from $600 to $2,000, effective for payments made after December 31, 2025. This applies to the 2026 tax year, meaning forms filed in 2027. The $600 threshold still applies to 2025 payments.
- New boxes for tips and overtime: Both forms now include dedicated boxes specifically for reporting cash tips and overtime compensation eligible for OBBBA tax deductions.
- Treasury Tipped Occupation Code TTOC: Only tips earned in an occupation on the Treasury Department’s list of occupations that receive tips count as qualified tips for the OBBBA deduction. When filling out this new box, enter the three-digit code to identify eligible tips. Entering code “000” indicates that the reported cash tips do not qualify for the deduction.
- Shifted compensation boxes: Standard nonemployee compensation on the NEC moved from Box 1 to Box 1a to make room for the new fields.
You can download the finalized 2026 forms below to review the changes:
We’ll share the final instruction manual as soon as the IRS makes it available.
Who must file a 1099-NEC?
Generally, any business that pays a non-employee independent contractor $2,000 or more during the tax year ($600 or more prior to 2026) must file Form 1099-NEC (or MISC). They must send Copy A to the IRS, and Copy B to the contractor, by January 31 of the year after the business paid the contractor, or the next business day if that date falls on a weekend or holiday.
The IRS calls Form 1099-NEC the “Nonemployee Compensation” form, while Form 1099-MISC is officially titled “Miscellaneous Information.” Both are information returns, and you don’t need to pay taxes when filing either form. Instead, the contractor pays their own taxes, generally in the form of quarterly estimated tax payments throughout the year. The 1099 simply informs the contractor and the IRS of how much you paid them for services during the year.
For more information, check out the IRS’s instructions for Forms 1099-MISC and 1099-NEC.
Related reading
After reading about when to use a 1099, we have another resource you may find helpful. Our primer on managing payroll has everything businesses need to make this a painless process.
When is a 1099-MISC required instead of a 1099-NEC?
While there are exceptions to every rule, you will need to send a 1099-MISC if you’ve paid:
- $2,000 for payments made in 2026 and after (or $600 for 2025 and earlier) for:
- Rents
- Prizes and awards
- Other income payments
- Medical and health care payments
- Crop insurance proceeds
- Any in fishing boat proceeds
- At least $600 in gross proceeds paid to an attorney
What’s the filing deadline for a 1099?
For tax year 2025, here are the due dates for each form.
| Form 1099-NEC | Form 1099-MISC |
| You’re required to furnish Form 1099-NEC to the payee and file with the IRS by January 31* for payments made to contractors during the prior calendar year. | You must send Form 1099-MISC to the payee by January 31*, and file with the IRS by February 28* if filing by paper, or by March 31 if filing electronically. |
* If these dates fall on a weekend or holiday, the deadline moves to the next business day.
Next, let’s review how you complete each form.
Form 1099-NEC/MISC instructions
In order to accurately complete a 1099-NEC, or
or 1099-MISC, you need information usually found on a W-9. All vendors, contractors, and non-employee workers should provide you with a completed Form W-9 before you pay them. Collecting a W-9 up front protects you even if a vendor’s payments stay below the 1099 reporting threshold for the year, since you won’t have to chase down their tax information late if their total payments end up crossing it.
Here’s what you need:
- The current version of Form 1099-NEC or Form 1099-MISC
- The legal name of the vendor, contractor, or non-employee worker
- Their business name, if it’s different from the individual’s name
- The federal tax classification of the contractor, so you know whether you need to issue a 1099-NEC or a 1099-MISC
- Current mailing addresses
- Tax Identification Number (TIN) or Social Security number (SSN)
- The total amount paid to the contractor for the calendar year
To get you started on the right foot, included is an image of the form itself so you can see how it fits in with all the boxes below.
Form 1099-MISC: Checking all the boxes
Once you’ve entered the above information into the 1099, you can populate the applicable boxes. Here’s a rundown with instructions for what each box is for:
Box 1 – Rents – This is used to report rent paid to a property owner. You don’t have to report rent paid to a real estate agent or property manager. This box is also used for machine rentals or pasture land rental.
Box 2 – Royalties – Use this box to report royalty payments of $10.00 or more for oil and gas royalties as well as royalties for intangible property such as patents, copyrights, and trademarks.
Box 3 – Other Income – Report other income of $2,000 or more (or $600 or more for 2025 and earlier payments) in this box. This is for any income that is not reportable in any of the other boxes on Form 1099.
Box 4 – Federal Income Tax Withheld – If you are required to complete backup withholding on any nonemployees or contractors, you enter the amount withheld in this box.
Box 5 – Fishing Boat Proceeds – Enter any proceeds from the sale of a catch on a fishing boat in this box. Enter any additional cash payments made to fishing boat crews in this box as well.
Box 6 – Medical and Health Care Payments – This includes payments made for various health care services such as injections or medications. Flexible spending accounts and employer-provided health care coverage are excluded. This mainly pertains to any payments made directly to a health care provider for services not covered by an insurance plan, but be sure to check the IRS instructions for specifics.
Box 7 – Payer Made Direct Sales of $5,000 or more – Enter an “X” in the checkbox for sales of $5,000 or more of consumer products by you to a person on a buy-sell, deposit–commission, or other commission basis for resale anywhere other than a retail establishment. You don’t need to enter a dollar figure in this box.
Box 8 – Substitute Payments in Lieu of Dividends or Interest – This is where you enter aggregate payments of at least $10 of substitute payments received by a broker for a customer in lieu of dividends or tax-exempt interest as a result of a loan of a customer’s securities.
Box 9 – Crop Insurance Proceeds – Use this box to report $2,000 or more of crop insurance proceeds paid to a farmer ($600 or more for 2025 and earlier payments).
Box 10 – Gross Proceeds Paid to an Attorney – Report proceeds of $600 or more paid to an attorney in connection with legal services, such as a settlement. The OBBBA didn’t change this reporting threshold.
Box 11 – Fish Purchased for Resale – If you are in the trade or business of purchasing fish for resale, you must report total cash payments of $600 or more paid during the year to any person who is engaged in the trade or business of catching fish.
Box 12 – Section 409A Deferrals – This box is not required. If you do complete this box, enter the total amount deferred during the year of at least $600.00 for the nonemployee under all nonqualified plans.
Box 13a and 13b – Cash Tips – These boxes are new for 2026. Box 13a shows the total amount of cash tips included in Box 3. Cash tips include tips paid in cash as well as tips charged by customers. In Box 13b, enter the three-digit TTOC for the payee’s tipped occupation.
Box 14 – Overtime compensation – This box is new for 2026. Enter the total amount of qualified overtime compensation included in Box 3, eligible for the OBBBA overtime deduction.
Box 15 – Nonqualified Deferred Compensation – Enter all amounts deferred (including earnings on amounts deferred) that are includible in income under section 409A if the nonqualified deferred compensation (NQDC) plan fails to satisfy the requirements of section 409A.
Boxes 16 – 18 – Use these boxes to report state or local income tax withheld from the payments.
In my experience, one of the most common mistakes employers make when issuing 1099s is printing and mailing a non-scannable version of Copy A to the IRS. It’s important to note that the version of Copy A that the IRS issues is special because it’s scannable by the IRS. Their version is colored red instead of black, and it can be ordered from the IRS, for free, here.
— David Kindness, CPA
Form 1099-NEC: Checking all the boxes
Filling out the boxes on Form 1099-NEC is a little different and there are fewer boxes. Below is an image of the entire form, as well as a breakdown of what goes into each box.
Box 1a – Nonemployee compensation – In this box, you enter the amount you paid an independent contractor (someone who is not your employee) for any labor or services that totaled $2,000 or more (or $600 or more for 2025 and earlier payments).
Box 1b – Cash Tips – This box is new for 2026. Enter the total amount of cash tips included in Box 1a.
Box 1c – TTOC – This box is new for 2026. Enter up to two TTOCs for the recipient’s tipped occupation.
Box 1d – Overtime xompensation – This box is new for 2026. Enter the total amount of qualified overtime compensation included in Box 1a.
Box 2 – Did you have any sales totaling $5,000 or more from products that were resold, deposit commission, or sold on another basis? Check this box, and you don’t need to enter any other information in this box.
Box 3 – Excess Golden Parachute Payments – This box moved from Form 1099-MISC to Form 1099-NEC for 2026. Report compensation subject to the 20 percent excise tax on excess golden parachute payments.
Box 4 – Federal income tax withheld – Withholding federal income tax is uncommon for contractors, but if any payments are subject to backup withholding (which ensures the IRS gets its share of taxes), enter that amount here. Independent contractors could be subject to backup withholding if they provided an incorrect tax identification number on Form W-9.
Box 5 – 7 – State Income Tax Withheld – Generally, you don’t have to withhold state income tax from someone who is not your employee. If you did, you’ll report the amount, your state ID number, and the state for which you withheld the tax in these boxes.
Saves time and simple to use
Operating a busy medical practice is time-consuming, and we’re always looking for ways to run tasks more efficiently so we can stay focused on providing patient care. That’s why we chose OnPay: it literally takes less than five minutes to run payroll each pay period, and that includes 1099s and full-time employees. It also makes adding end-of-year bonuses a breeze.
— Daniel Lindenberg, MD
Know when to use Form 1099-MISC or Form 1099-NEC
Whether it’s NEC or MISC, Form 1099 can be one of the more confusing forms you have to fill out. But if you keep your accounting records up to date throughout the year, most of the work is done for you.
While small companies may process their 1099s without the use of a payroll software provider, for those that pay several contractors or issue a high volume of forms each year, it pays to automate the process as much as possible.
For more information on Form 1099-NEC or Form 1099-MISC, visit the IRS website or consult your CPA or tax advisor.
Please note all material in this article is for educational purposes only and does not constitute tax or legal advice. You should always contact a qualified tax, legal or financial professional, in your area for comprehensive tax or legal advice.
