1099 vs 1099-NEC: Which Form Do You Actually Need?
1099-NEC is for nonemployee compensation paid to a freelancer or contractor. 1099-MISC (the general "1099") covers other payment types like rents and royalties. Here's how to tell which one applies to you.
The short answer
If you paid a freelancer, consultant, or independent contractor $600 or more for services during the year, you need a 1099-NEC. If the payment was for something else — rent, royalties, prizes, or a handful of other specific categories — it goes on a 1099-MISC instead. Most small businesses paying contractors will only ever need the 1099-NEC.
Why there are two forms
Before 2020, nonemployee compensation was reported in Box 7 of the 1099-MISC. The IRS split it into its own dedicated form, the 1099-NEC, starting with the 2020 tax year — partly to enforce an earlier filing deadline (January 31) for contractor payments specifically, separate from the other 1099-MISC categories, which have a later deadline.
What goes on a 1099-NEC
Box 1 is nonemployee compensation — the total paid to that contractor for the year. Box 4 is federal income tax withheld, which is almost always $0 unless backup withholding applied. The form also carries the payer's and recipient's names, addresses and tax ID numbers, plus optional state withholding boxes.
What goes on a 1099-MISC
1099-MISC covers rents (Box 1), royalties (Box 2), other income (Box 3), and several less common categories like fishing boat proceeds or crop insurance proceeds. If none of your payments fit those categories and you're just paying someone for their work, you want the 1099-NEC, not this form.
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Frequently asked questions
Do I need to send a 1099 to a contractor paid less than $600?
Generally no — $600 is the threshold that triggers the filing requirement for nonemployee compensation. Below that, most businesses don't issue one, though there's no rule against it.
What if I paid someone for both services and rent?
You'd typically report the two separately — nonemployee compensation on a 1099-NEC and the rent portion on a 1099-MISC — since they're different payment categories.
Does an LLC or corporation still get a 1099?
Corporations are usually exempt from 1099 reporting; LLCs depend on how they're taxed. Payers typically collect a Form W-9 from every contractor up front specifically to sort this out before paying them.