In January 2022, these 1099 forms were revised, again.
Recipients use Form 1099-NEC and Form 1099-MISC to file their federal and any applicable state tax returns.
Form 1099-NEC doesn’t entirely replace Form 1099-MISC for payers needing to report other miscellaneous types of payments besides non-employee compensation. From 1099-NEC is a new IRS information return tax form for reporting at least $600 in non-employee compensation payments and tax withholding in the course of a trade or business per calendar year.
Payments made to an individual, partnership, estate, or sometimes a corporation may be reported on Form 1099-NEC. Despite the general exception for corporation payees, reporting attorneys’ fees (Box 1, Form 1099-NEC) or gross income (Box 10, Form 1099-MISC) of corporations providing legal services is required on a Form 1099).
Independent contractors, whose income payments may be reported by payers on Form 1099-NEC, include:
- freelancers
- self-employed service providers operating as individuals or small businesses, including:
- attorneys,
- CPAs,
- tax professionals, and
- real estate agents not paid as employees, using Form W-2.
Independent contractors and other suppliers provide a Form W-9 with their contact information and taxpayer identification number (TIN) to their clients or customers for filing forms 1099-NEC to report nonemployee compensation and backup withholding and 1099-MISC to report miscellaneous types of payments. Payers send (or efile) a copy of Form 1099-NEC to the IRS, applicable states, and payees.
Types of taxpayer identification numbers include SSN (social security number), ITIN (individual taxpayer identification number), ATIN (taxpayer identification number for pending U.S. adoptions), or EIN (employer identification number).
The payer needs to follow the IRS backup withholding rules for non-employee compensation by withholding income taxes if a payee didn’t provide them with a taxpayer ID number (TIN) or the IRS lets the payer know that the taxpayer identification number for the payee is incorrect.
Instead of filing Form 1099-NEC for non-employee independent contractors that are non-resident aliens, use Form 1042-S for reporting contractor payments and IRS Form 1042.
Who is Form 1099-NEC for?
Form 1099-NEC is used for reporting payer direct sales of $5,000 or more in consumer products to the recipient for resale.
Payments made to an individual, partnership, estate, or sometimes a corporation may be reported on Form 1099-NEC. Despite the general exception for corporation payees, reporting attorneys’ fees (Box 1, Form 1099-NEC) or gross income (Box 10, Form 1099-MISC) of corporations providing legal services is required on a Form 1099).
Independent contractors, whose income payments may be reported by payers on Form 1099-NEC, include:
- freelancers
- self-employed service providers operating as individuals or small businesses, including:
- attorneys,
- CPAs,
- tax professionals, and
- real estate agents not paid as employees, using Form W-2.
Independent contractors and other suppliers provide a Form W-9 with their contact information and taxpayer identification number (TIN) to their clients or customers for filing forms 1099-NEC to report nonemployee compensation and backup withholding and 1099-MISC to report miscellaneous types of payments. Payers send (or efile) a copy of Form 1099-NEC to the IRS, applicable states, and payees.
Types of taxpayer identification numbers include SSN (social security number), ITIN (individual taxpayer identification number), ATIN (taxpayer identification number for pending U.S. adoptions), or EIN (employer identification number).
The payer needs to follow the IRS backup withholding rules for non-employee compensation by withholding income taxes if a payee didn’t provide them with a taxpayer ID number (TIN) or the IRS lets the payer know that the taxpayer identification number for the payee is incorrect.
Instead of filing Form 1099-NEC for non-employee independent contractors that are nonresident aliens, use Form 1042-S for reporting contractor payments and IRS Form 1042.
What is Form 1099-MISC?
Form 1099-MISC is an IRS form used by payers to report specified miscellaneous income payments, generally over $600, made in the course of a trade or business during a calendar year.
More specifically, payers should file Form 1099-MISC to report:
- $10 or more in royalties (Box 2) or broker payments in lieu of dividends or tax-exempt interest (Box 8)
- $600 or more in:
- Prizes and awards, other income payments, and cash paid from a notional principal contract to an individual, partnership, or estate, in general (Box 3);
- Fishing boat proceeds (Box 5)
- Medical and health care payments (Box 6)
- Crop insurance proceeds (Box 9)
- Payments to an attorney (Box 10) – claims gross income
- Section 409A deferrals (Box 12)
- Non-qualified deferred compensation (Box 14)
How can your business report supplier payments correctly?
Use AP automation software for self-service supplier onboarding and verification, and payment tracking to efficiently prepare 1099 forms to report global supplier payments.
What is the Difference Between Form 1099-NEC and Form 1099-MISC?
The difference between IRS Form 1099-NEC and Form 1099-MISC information returns is that Form 1099-NEC is used by payers to report non-employee compensation and follow backup withholding rules. Form 1099-MISC is used by payers to report information on other types of miscellaneous non-employee payments.
The IRS provides instructions for tax Form 1099-NEC and Form 1099-MISC with more details about each form and the differences. Read other Tipalti articles covering Form 1099-NEC and Form 1099-MISC for more information, including differences in filing Form 1099-NEC vs Form 1099-MISC.
What is the Due Date for Filing Form 1099-NEC and Form 1099-MISC?
For 2023 due dates covering 2022 payments, the IRS General Instructions indicate the filing deadline for electronic and paper filers of Form 1099-NEC is January 31, 2023, a month after the end of the tax year for which payments are being reported, with no 30-day automatic extension offered. Form 1099-NEC is sent to recipients by January 31, 2023.
Although Form 1099-MISC must be sent to the recipient by February 15, 2023 (if amounts are reported in boxes 8 or 10), payer businesses must file Form 1099-MISC with the IRS by February 28, 2023, if paper filing or March 31, 2023, if efiling the form with the IRS. If payees have hardship conditions, they may be able to extend the deadline for filing the 1099 information returns.
The IRS imposes deadlines for filing forms 1099-NEC and 1099-MISC to detect fraud and verify the income of payee recipients when they file a U.S. federal tax return by checking that it includes reportable income from a payer.