1099 Instructions: Guide to Filing 1099-NEC and 1099-MISC in 2026

Filing 1099s is one of the most time-sensitive and error-prone tasks finance teams face each year. Controllers and AP professionals must quickly determine whether payments belong on Form 1099-NEC or 1099-MISC, apply the correct thresholds and boxes, and meet strict IRS deadlines, where misclassification can lead to costly penalties.

These 1099 instructions provide step-by-step guidance on how to file 1099-NEC and 1099-MISC forms for the 2026 filing season, including who must receive a 1099, key deadlines like the January 31 cutoff, and the IRS’s new 10-return electronic filing mandate. 

You’ll also learn how automation can simplify W-9 collection, TIN validation, and eFiling, helping reduce risk and scale 1099 compliance.

What Are Forms 1099-NEC and 1099-MISC?

Forms 1099-NEC and 1099-MISC are IRS information returns used to report different types of nonemployee income, including contractor payments, rent, royalties, and other miscellaneous payments.

Before you can worry about which box to fill, you need a clear understanding of what these documents actually represent in the eyes of the Internal Revenue Service (IRS). These documents are classified as “Information Returns.”

Unlike a tax return, which you pay, an information return is a tool for the government to track income flowing through the economy. Your role as the payer is to act as the reporter, providing the IRS with the tax information it needs to ensure the recipient meets their reporting requirements.

Form 1099-NEC (Nonemployee Compensation)

You will use Form 1099-NEC specifically to report compensation paid to non-employees. This covers your independent contractors, freelancers, gig workers, and self-employed consultants.  If you pay a person, non-corporate business, or other service provider for services performed and they are not on your payroll, use this form.

The IRS reintroduced this form in 2020 to separate these payments from other miscellaneous income, primarily to enforce a strict January 31st filing deadline that helps combat tax fraud.

Form 1099-MISC (Miscellaneous Information)

Think of Form 1099-MISC as the “catch-all” reporting document for income that does not fit the definition of active work or service. You use this form to report payments such as rent for your office space, royalties paid for intellectual property or software, prizes and awards, and specific types of medical and health care payments.

While it used to cover contractor pay, its scope is now much narrower. Confusing these two forms is the primary cause of filing errors, so maintaining a strict separation between “service income” and “miscellaneous income” in your 1099-NEC data is critical.

1099-NEC vs. 1099-MISC: Which Form Should You Use?

Choosing the correct IRS form is your first line of defense against misclassification penalties and employment tax issues. The IRS treats these two forms very differently, especially when it comes to filing deadlines. 

Whether you are a large enterprise or a small business, the easiest way to distinguish them is to ask what you are paying for.

• Use Form 1099-NEC if you are paying for work (someone’s time, effort, or skill). 
• Use Form 1099-MISC if you are paying for the use of an asset, such as a building, equipment, or intellectual property rights. 

If you report contractor pay on a MISC form instead of an NEC form, you might inadvertently miss the January 31st deadline, triggering automatic late-filing penalties for the tax year.

There are nuances, especially with legal payments, so it is often wise to consult your CPA or tax professional.

The 1099 Decision Matrix

Use this quick decision matrix to route payments to the correct 1099 form and avoid misclassification penalties.

For a deeper dive into these payment types, including legal payments and their due dates, you can review our detailed breakdown of 1099-NEC vs. 1099-MISC.

Step-by-Step 1099-NEC Instructions

This form likely accounts for the bulk of your filing volume. Since its reintroduction, the 1099-NEC has become the primary reporting vehicle for the modern economy, covering everything from gig workers to high-end consultants.

Getting these 1099 NEC instructions right is critical for all filers, as this form has a strict January 31st deadline.

1099-NEC Box-by-Box Filing Guide

Payer and Recipient Information

This seems basic, but it is the source of most error notices. Ensure the Recipient’s TIN (Taxpayer Identification Number), whether it is an Employer Identification Number (EIN) or a personal Social Security Number, matches their Name exactly as it appears in the IRS database.

A mismatch here triggers a CP2100A “B-Notice” later in the year. If you are using TIN Matching during onboarding, this data should already be clean.

Box 1 (Nonemployee Compensation)

This is where you report the total amount paid for non-employee compensation. It includes fees, commissions, prizes, and awards for services performed by a non-employee.

Include the cost of parts or materials furnished by the contractor if they were incidental to the service. Do not include personal payments or wages reported on Form W-2.

Box 4 (Federal Income Tax Withheld)

You should ideally leave this blank. If there is a number here, it means your onboarding process failed. You only report amounts in Box 4 if you had to perform tax withholding (currently 24%) because the payee failed to furnish a correct TIN.

If you withheld this money, report it here. If you didn’t withhold it but should have, you may be liable for that tax yourself.

Boxes 5-7 (State Information)

These boxes are for state filing requirements. While the IRS Combined Federal/State Filing (CF/SF) Program forwards data to participating states, not all states participate, and some have lower thresholds. You must verify if you need to file directly with the specific state departments of revenue.

Step-by-Step 1099-MISC Instructions

While your NEC volume might be higher, the 1099-MISC requires more nuanced categorization. This form captures the diverse “other” income streams that flow through a business, and each box represents a different type of liability.

Before diving in, it is always wise to review the IRS’s general instructions to ensure you aren’t miscategorizing income that belongs on a different return.

1099-MISC Box-by-Box Filing Guide

Box 1 (Rents)

If you paid $600 or more for business space, machinery, or equipment rentals, report it here. Note that if you paid a property manager, you report the gross rent to them, and they handle the owner reporting.

Box 2 (Royalties)

This box has a much lower threshold; you must report royalties of $10 or more. This applies to payments for the use of intellectual property, such as copyrights, patents, and industrial assets.

Box 3 (Other Income)

This is the “catch-all” for payments of $600 or more that don’t fit anywhere else, commonly used for prizes and awards, not for services performed.

Niche Industry Boxes

There are specific boxes for specialized industries. For example, Box 5 is used for fishing boat proceeds, and Box 9 is designated for crop insurance proceeds. While rare for a tech company, missing these can trigger audits in those specific sectors.

Box 10 (Gross Proceeds Paid to an Attorney)

This box is a frequent trap. It is used to report “Gross Proceeds” paid to an attorney, typically in the context of a settlement agreement. This is distinct from the legal fees you pay for the attorney’s services, which go on Form 1099-NEC.

Boxes 15-17 (State Tax Withheld)

Similar to the NEC form, these boxes are used to report state tax withheld and the associated state income, though you must verify if your state participates in the combined federal filing program.

How to Issue a 1099 to a Contractor: The Filing Process

Now that your data is sorted, you face the logistical hurdle of actually getting these forms to the IRS and your payees. This is where the process often breaks down for growing finance teams. Knowing how to issue a 1099 correctly means managing strict deadlines and navigating a new, digital-first regulatory environment.

Critical 1099 Filing Deadlines

January 31 is a hard IRS deadline for filing Form 1099-NEC and delivering Copy B to contractors. Unlike the 1099-MISC, which offers a filing window until March 31st (for electronic filings), the NEC deadline is rigid.

The New Electronic Filing Mandate

The IRS has fundamentally changed the game by lowering the electronic filing threshold from 250 returns down to just 10. This aggregation rule means that if you file 10 or more information returns of any type (including W-2s, 1099s, etc.), you are legally required to e-file.

For all intents and purposes, paper filing is now obsolete for businesses.

Navigating IRS Filing Systems

To handle this electronically without third-party software, you must navigate the IRS’s own portals, specifications for which can be found at irs.gov. You can file 1099 online using the legacy FIRE system or the newer IRIS platform, assuming you collected a valid Form W-9 upfront.

However, be warned that these are not user-friendly experiences. FIRE requires a TCC code, and IRIS often requires manual entry.

Understanding how to issue 1099s to contractors efficiently means recognizing that direct IRS filing is often a bottleneck, especially when your contractors are waiting on these forms to file their own Form 1040 income tax returns.

Automate 1099 Compliance for High-Volume Payments

For a modern business, especially one operating in the gig economy, digital media or ad tech, the concept of filing is a massive data logistics challenge. If you are paying five hundred, five thousand, or fifty thousand partners, the manual methods of the past simply break down.

You cannot hire enough AP clerks to manually type that many records into the IRS portal without making costly mistakes.

Seamless E-Filing with Tipalti’s Zenwork Integration

To solve the final mile of the process, Tipalti leverages a powerful integration with Zenwork (Tax1099). This integration allows you to push your validated payee and payment data directly from Tipalti into the tax filing engine. This enables seamless e-filing to both the IRS and state agencies, handling both 1099s and 1042-S forms without the risk of manual CSV manipulation.

Start Automating 1099 Tax Compliance 

1099 compliance is ultimately about data integrity, not just filling out boxes on a PDF. If your vendor master file is clean and your TINs are validated, year-end filing is a simple export. If your data is messy, it becomes a high-risk forensic accounting project.

The shift to modern finance operations means moving from frantic year-end cleanups to automated data governance. By implementing a system that captures and validates tax data before a payment is ever made, you protect your organization from penalties and free your team from the January scramble.