1099-NEC vs. 1099-MISC: Controller’s Guide to Compliance in 2026

To file accurately and avoid IRS penalties, finance teams need to understand the difference between Form 1099-NEC and Form 1099-MISC. 

These forms apply to different payment types, deadlines, and reporting requirements, and getting them wrong can create unnecessary corrections and compliance risk. Automation can help streamline tax reporting across both accounts payable and high-volume payouts.

1099-NEC vs.1099-MISC: Key Differences Table

What is Form 1099-NEC?

Form 1099-NEC is an IRS information return tax form for reporting Nonemployee Compensation payments and tax withholding in the course of a trade or business. Nonemployee Compensation means reportable payments to business owners or independent contractors who don’t file their federal income tax returns as C Corporations or S Corporations.

The 1099-NEC reporting dollar threshold is at least $600 for calendar year 2025 payments, increasing to $2,000 for 2026 payments, then indexed for inflation in later years. (The new threshold also applies to reporting most 1099-MISC items.) 

Other Form 1099-NEC Details

Form 1099-NEC is also used for reporting (with a checkmark in box 2) payer-direct sales of $5,000 or more in consumer products to the recipient for resale, although these payments can be reported on Form 1099-MISC instead.

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 proceeds paid to an attorney (Box 10, Form 1099-MISC) of corporations providing legal services is required on Form 1099. 

Independent contractors, whose income payments may be reported by payers on Form 1099-NEC, include:

• freelancers
• self-employed individuals, sole proprietors, or small business service providers, including:
  • attorneys
  • CPAs
  • tax professionals
  • real estate agents not paid as employees, using Form W-2

In addition to federal income tax, independent contractors pay federal self-employment tax on their earnings. 

The 1099 for attorney fees is 1099-NEC, whereas gross proceeds from litigation for attorneys are reported on Form 1099-MISC. As a 1099 exception, the IRS also requires reporting attorney fees and gross proceeds from litigation for amounts paid to corporations in addition to other entities, such as independent contractors. 

Independent contractors and other suppliers provide Form W-9, including 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 and backup withholding.

Payers send (or efile) a copy of Form 1099-NEC to the IRS, applicable states, and payees. Effective January 1, 2024, the revised threshold for eFiling 1099 and other information returns is a combined total of 10 or more (instead of the previous 250-form threshold).

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 nonemployee 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 nonemployee independent contractors who 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 types of payments for miscellaneous income, generally over $600 (for 2025 calendar-year payments), made in the course of a trade or business during a calendar year.

More specifically, payers should file Form 1099-MISC for calendar year 2025 payments to report these types of income:

• $10 or more in royalties (Box 2) or broker payments in lieu of dividends or tax-exempt interest (Box 8)
• $600 or more (for 2025 payments) 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)
  • Nonqualified deferred compensation (Box 15)

How Do You File Form 1099-NEC and Form 1099-MISC?

Note that, beginning with January 1, 2024, the IRS and Treasury Department changed the eFiling (electronic filing) requirement threshold from 250 to only issuing a total of 10 forms or more (calculated by aggregating all information returns), mandating eFiling (instead of paper filing) 1099 forms and distribution to payee recipients. 

The IRS has a portal called the Information Returns Intake System (IRIS) to simplify eFiling, which includes free filing of information returns, such as 1099s.

IRS filing requirements specify that payers should use a separate IRS transmittal Form 1096 to send each type of 1099 form by the tax reporting deadlines (to report a calendar year’s payments) only when paper-filing Forms 1099-NEC and Forms 1099-MISC with the IRS. The paper 1099 copies and the 1096 transmittal form sent to the IRS for information return tax filings must be official, scannable, and printable forms that can be ordered from the IRS website. 

Streamlining 1099 Filing with Tipalti’s Zenwork Integration

When your business pays contractors, vendors, landlords, and partners across different payment streams, it’s easy for reporting rules to break down, especially when 1099-NEC and 1099-MISC data live in spreadsheets, inboxes, and disconnected systems. The result is often last-minute cleanup: missing W-9s, TIN mismatches, backup withholding errors, and avoidable corrections.

Tipalti helps teams manage 1099 compliance as an end-to-end workflow, not a year-end scramble, by automating onboarding, validation, withholding calculations, and reporting across mass payouts and AP.

Tipalti recently launched a native integration with Zenwork Tax1099 to help streamline 1099 e-filing and recipient delivery. With validated payee and payment data flowing from Tipalti into Zenwork, finance teams can reduce manual uploads, avoid CSV rework, and accelerate year-end reporting with stronger accuracy and control.

Tipalti Finance Automation Software for Global Payouts and AP

When your business supports different payment types, you need a consistent way to classify payees, validate tax details, and report the right income on the right form—whether it falls under 1099-NEC or 1099-MISC.

Tipalti’s finance automation platform unifies AP Automation and Mass Payments to help teams streamline payables and stay compliant at scale by:

• Syncing payment data bi-directionally with your ERP or accounting system for faster reconciliation and reporting
• Supporting real-time, multi-entity operations as payment volume and complexity grow
• Automating onboarding with self-service W-9/W-8 collection and built-in TIN matching
• Tracking payments year-round and calculating backup withholding automatically when required
• Generating tax prep reports for 1099 and 1042-S filing
• Strengthening controls with built-in compliance coverage, including sanctions screening, AML, KYC, and other global regulatory requirements
• Reducing manual effort, approval delays, errors, and fraud exposure across the full payables lifecycle

Which States Do Not Require Filing a 1099?

1099 Changes and What Controllers Need to Know in 2026

The following changes represent the major redesign to create separate 1099-MISC and 1099-NEC forms, beginning for the 2020 tax year and subsequent form revisions. 

Form 1099-MISC 

When the payer eFiles or sends on paper the Forms 1099-NEC and 1099-MISC, Copy A goes to the Internal Revenue Service Center, Copy 1 to the state tax department (if applicable), and Copy B (and also Copy 2 if state income taxes) to the recipient. For Form 1099-NEC Copy B (and possibly Copy 2), the recipient may be an independent contractor. 

With the April 2025 revision, the 1099-MISC form no longer includes a form year but allows payers to indicate the calendar year for which payments are reported in this 1099 information return.

A sample of Form 1099-MISC that shouldn’t be copied and filed with the IRS (because it’s not machine-readable) is shown above. The following items or boxes changed in Form 1099-MISC, beginning with tax year 2020.

Box 7, Form 1099-MISC Changes

Box 7 of Form 1099-MISC for reporting nonemployee compensation was removed from the tax form. Instead, Form 1099-NEC is used to report nonemployee compensation, beginning for the 2020 tax year. Box 7 of Form 1099-MISC is a checkbox for payer-made direct sales of $5,000 or more.

Box 9, Form 1099-MISC Change

Report crop insurance proceeds in Box 9 of Form 1099-MISC.

Box 10, Form 1099-MISC Change

Report the gross proceeds to an attorney in Box 10 of Form 1099-MISC, even if the attorney files a corporation return. The gross proceeds are for claims paid to an attorney without deducting attorney’s fees (which would be reported on Form 1099-NEC, Box 1).

Box 12, Form 1099-MISC Change

Report Section 409a deferrals in Box 12 of Form 1099-MISC.

Box 13, Form 1099-MISC Change

If applicable, check the FATCA filing requirement checkbox in Box 13.

Box 14, Form 1099-MISC Change

Effective for calendar 2025, no longer use Box 14 of 1099-MISC to report excess golden parachute payments, because the form was revised to move this reporting requirement to Box 3 of Form 1099-NEC

Box 15, Form 1099-MISC Change

Use Box 15 of 1099-MISC to report nonqualified deferred compensation income.

Boxes 16, 17 & 18, Form 1099-MISC Changes for State Information

Payer filers use these Form 1099-MISC boxes to report state filing information to each applicable state tax department and recipient needing the information to file a state tax return. 

Box 16 – state taxes withheld
Box 17 – state identification number
Box 18 – amount of income earned in the state

The U.S. has nine states with no income taxes (except as indicated):

1. Alaska (no individual income tax, but corporate income tax)
2. Florida (no individual income tax, but corporate income tax)
3. Nevada
4. New Hampshire (only interest and dividend earnings for individuals but corporate income tax)
5. South Dakota
6. Tennessee (only interest and dividend earnings  for individuals but corporate income tax)
7. Texas (no individual income tax but gross receipts tax)
8. Washington (no individual income tax but B&O gross receipts tax)
9. Wyoming

Form 1099-NEC

A sample of Form 1099-NEC that shouldn’t be copied and filed with the IRS (because it’s not scannable) is shown above.

With the April 2025 revision, the 1099-NEC form no longer includes a form year but allows payers to indicate the calendar year for which payments are reported in this 1099 information return. For example, you can use Form 1099-NEC as a 1099 Form 2025 and subsequent years as a 1099 Form 2026 or later year tax information return. 

Items reported in Form 1099-NEC include:

• A checkbox for VOID or CORRECTED Form 1099-NEC
• Payer’s and Recipient’s contact information and taxpayer identification number (TIN)
• Account number for payee
• Checkbox for 2nd TIN notice
• Box 1 – Total dollar amount of Nonemployee compensation
• Box 2 – Checkbox for Payer made direct sales totaling $5,000 or more of consumer products to the recipient for resale
• Box 3 – Effective starting with calendar 2025 payments, report excess golden parachute payments on Form 1099-NEC instead of Form 1099-MISC
• Box 4 – Federal income tax withheld in dollars
  • Box 4 is for reporting backup withholding.
• Box 5 – State tax withheld in dollars
• Box 6 – State/Payer’s state number
• Box 7 – State income in dollars (paid to the recipient)

What is the Due Date for Filing Form 1099-NEC and Form 1099-MISC?

Note that the NEC vs MISC 1099 forms have different due dates. 

For 2026 due dates covering 2025 calendar-year payments, the IRS General Instructions indicate the filing deadline for electronic and paper filers of Form 1099-NEC is February 2, 2026, because January 31st, the general IRS-specified due date, falls on a Saturday in 2026. This due date is about a month after the end of the tax year for which payments are being reported, with no 30-day automatic extension. Form 1099-NEC, usually sent to recipients by January 31st, will also be due on Monday, February 2, 2026, which is the following business day. 

Form 1099-MISC must be sent to the recipient by Monday, February 2, 2026, or by February 17, 2026, if amounts are reported in boxes 8 or 10. Payer businesses must file Form 1099-MISC with the IRS by Monday, March 2, 2026, if paper filing or March 31, 2026, if eFiling the form with the IRS. If payees are experiencing hardship, 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 during tax season by checking that it includes reportable income from a payer.

Penalties for Not Filing a 1099

The IRS imposes penalties (and interest) on each 1099 and payee statement for not filing and distributing a correct 1099 and payee statement by the deadline. The IRS may extend the filing deadline for information returns upon the filer’s request. These 1099-related penalties may be appealed. 

According to the IRS document on information return penalties, the amount of penalties for each information return or payee statement depends on the year due, days late or not yet filed, and whether there is intentional disregard. 

For example, on each 1099 information return and payee statement due in 2026, penalties are for these amounts, with substantial maximum IRS penalties, separately designated for large or midmarket companies vs. small businesses averaging less than $5 million in gross receipts over their three most recent tax years:

For 1099-NEC and 1099-MISC filings due in 2026, the maximum penalty ranges from $683,000 to $4,098,500 per year for larger companies, or $239,000 to $1,366,000 for IRS-defined small businesses, depending on the number of days late or whether an information return is not filed. 

Common 1099 Mistakes and Controller Responsibilities

Controllers must obtain the necessary knowledge and take action to avoid common 1099 mistakes and IRS penalties for inaccuracies, missing or late filings, or noncompliance. 

Common 1099 Mistakes

Controllers and their accounting team commonly make these 1099 mistakes:

• The business doesn’t collect W-9 or W-8 series forms from payees and other suppliers immediately upon onboarding. 
• The company wastes time before calendar year-end to follow up on missing W-9 or S-8 forms. 
• TIN numbers and names aren’t matched to the IRS database to ensure accuracy.
• The company doesn’t comply with backup withholding requirements. 
• Manual data entry of paper W-9 or W-8 forms results in 1099 MISC and 1099 NEC form errors. 
• Time-consuming and error-prone spreadsheets are used to track calendar-year payments. 
• The business misses deadlines for filing 1099 and 1042-S information returns and distributing copies to recipients. 

Build a Repeatable 1099 Process That Scales

Form 1099-NEC and Form 1099-MISC serve different reporting purposes—and filing the wrong income type on the wrong form can create avoidable delays, corrections, and compliance risk. Since the IRS separated contractor compensation into Form 1099-NEC (starting with the 2020 tax year), it’s become even more important for finance teams to categorize payments correctly, track deadlines, and maintain clean payee data throughout the year.

If backup withholding applies, it may need to be reported on either form, depending on the payment type. And because IRS requirements and form details can change, it’s always a good idea to confirm the latest filing rules in the official IRS instructions and consult your CPA or attorney as needed—especially if your organization manages high payment volumes or multiple entity types.

To reduce manual work and lower year-end reporting risk, explore Tipalti Automated Tax Compliance to automate W-9 collection, validate TINs, and streamline 1099 filing at scale.

Controller Responsibilities 

As a Controller or Financial Manager, for trade or business-related payments tax compliance, you are responsible for:

• Meeting 1099 deadlines 
• Complete and accurate reporting 
• Avoiding IRS 1099-related penalties 
• Calculating any required backup withholding from payees  

Additionally, you and your finance team must meet the challenge of high-volume contractor and partner payouts. Using Tipalti Mass Payments (for mass payouts to your independent contractors, affiliates, and creators) enables your company to: 

• Collect and validate W-9/W-8 forms from payees upfront 
• Automate global regulatory compliance
• Make streamlined and efficient payouts using AI automation
• Strengthen internal controls, reducing fraud risks and errors
• Automate, simplify, and improve 1099 reporting 
• Optionally automate eFiling and distributing copies of 1099s with integrated Zenwork Tax1099