Search

Form 1099-MISC, 1099-NEC or 1099-K: What’s the Difference?

here are specific tax forms that you should fill out during the current tax season. If you are self-employed or working on a contract basis with no taxes withheld, you may fill out different tax forms.
Form 1099-MISC, 1099-NEC or 1099-K: What’s the Difference?
Self-employment can provide many benefits. From working in the comfort of your own space to enjoying your own work time like a boss, it can give you hands-on experience across all aspects of a business. But, did you know you can take advantage of deserved business expense deductions?
In this article

If you bought a computer or office supplies as part of your self-employment, you can deduct your office supplies or office equipment from your taxes. There are specific tax forms that you should fill out during the current tax season. If you are self-employed or working on a contract basis with no taxes withheld, you may fill out different tax forms.

This includes a 1099-NEC (formerly reported on Form 1099-MISC) or Form 1099-K if third-party payment services like PayPal pay you. Effective tax year 2020, freelancers, consultants, and gig economy workers earning $600 or more are required to fill out 1099-NEC. Before 2020, self-employed individuals received a 1099-MISC. 

Before learning the difference between 1099-MISC, 1099-NEC and 1099-K, it is important to understand who qualifies as self-employed/contractor.

Who Qualifies as Self-Employed/Contractor

IRS defines self-employed/independent as an individual who has the right to control or direct only the result of the work and not what will be done and how it will be done.

An independent contractor can be any individual who earns their livelihood by providing services to the public and doesn’t work under a traditional employer-employee partnership. For instance, doctors and lawyers with a private practice, IT or web designers, and online freelancers.

What is Form 1099-NEC? Who Receives Form 1099-NEC?

Self-employed individuals/independent contractors such as freelancers or side-jiggers who receive $600 or more in salary get Form 1099-NEC (non-employee compensation). A 1099-NEC may not apply if they are earning under $600, but they must still report all their income. A self-employed person must report their income if their net earnings from their job are $400 or more.

Upon receiving a 1099-NEC, the individual can report their income and claim deductions against that income on a Schedule C. It will further lower their taxable income from self-employment. 

What is Form 1099-K? Who Receives a 1099-K?

Credit card companies and third-party processors like PayPal use Form 1099-K (Payment Card and Third Party Network Transactions) to report transactions processed for retailers or other third parties. 

A taxpayer receives a 1099-K if they accept credit, debit, or prepaid cards and have more than $20,000 in sales. Furthermore, it requires over 200 individual transactions through a third-party processor. It is used to report the gross amount of the transactions. Your on-demand economy partner must provide you with relevant information to translate the 1099-K information into income and expenses to report.

Effective January 2023, if any self-employed person receives payment for goods and services through a third-party payment network like PayPal, their income will be reported on Form 1099-K if the amount exceeds $600.

What is Form 1099-MISC? Who Receives a 1099-MISC?

The IRS replaced Form 1099-MISC with Form 1099-NEC for the self-employed. As a result, while previously self-employed and gig economy workers received 1099-MISC, they will receive 1099-NEC for many purposes. However, there’s a possibility that you may still receive a 1099-MISC for any other miscellaneous income you earned. Here’s a list of some other types of income reported on Form 1099-MISC:

  • $10 or more in royalties or broker payments in lieu of dividends or tax-exempt interest.
  • $600 or more in – rent, prizes and awards, medical and health care payments and cash payments for fish (or other aquatic life) you purchase from someone engaged in the trade among other factors. 

How You Should Prepare

When it comes to tax-related documents, it is crucial to keep accurate and comprehensive records to stay compliant with these forms. According to experts, employers should closely track all independent contractors to make sure those who meet or exceed the 1099-NEC threshold receive a Form 1099, among others. 

In the end, start working on these forms and review your tax situation as soon as possible. 

File with Beem

File your taxes with Beem. Estimate your Federal and State taxes with Beem’s Free Tax Calculator. Enjoy online tax filing with our 100% accuracy and get the maximum refund. Get started now.

Was this helpful?

Did you like the post or would you like to give some feedback? Let us know your opinion by clicking one of the buttons below!

👍👎
Monica Aggarwal

Monica Aggarwal

A journalist by profession, Monica stays on her toes 24x7 and continuously seeks growth and development across all fronts. She loves beaches and enjoys a good book by the sea. Her family and friends are her biggest support system.

This page is purely informational. Beem does not provide financial, legal or accounting advice. This article has been prepared for informational purposes only. It is not intended to provide financial, legal or accounting advice and should not be relied on for the same. Please consult your own financial, legal and accounting advisors before engaging in any transactions.

Related Posts

Do Homeless People Pay Taxes
Do Homeless People Pay Taxes?
Being homeless is a complicated problem that affects a huge number of people all over the United States. Some of them pay taxes, but not all do. Here's a detailed guide to help through paying taxes for homeless people.
List of Tax Deductions for Lawn Care Business [2024]
Do Nursing Home Residents on Medicaid Need to File Income Taxes?
Do Nursing Home Residents on Medicaid Need to File Income Taxes?
Low-income people obtain health insurance through Medicaid. If you are covered under this program, you may not have to file income taxes if your income is below the filing threshold. Let's read on to know more!
game-show
Taxes on game show winnings and prizes: How much tax you have to pay?
Winning at least $600 is likely to result in a 1099-MISC tax form being sent by the awarding entity to both the winner and the IRS. If no form is received, the winner is still obligated to report the winnings value.
60000 after tax
60k a year is how much a month/week/hour after taxes?
If you earn a yearly salary of $60,000, it is crucial to know the amount of income tax you are obligated to pay. Planning ahead and determining the income tax rate on a salary of $60,000 per year can help you efficiently navigate the tax filing process. Calculating how much you owe can be a daunting task, but our blog provides a useful breakdown to help you determine the amount of tax you need to pay this year.
W2 Form 2024: Everything You Need to Know
The IRS requires employers to send their employees a copy of their W-2 form by January 31 or face penalties. Even if you have quit your job, your last employer can send you a W-2 by  January 31 or earlier, in which case the employer has 30 days to provide it.
Features
Essentials

Get up to $1,000 for emergencies

Send money to anyone in the US

Ger personalized financial insights

Monitor and grow credit score

Get up to 20% on everyday spends

Save up to 40% on car insurance

Get up to $1,000 for loss of income

Insure up to $1 Million

Coming Soon

File federal and state taxes at low cost

Quick estimate of your tax returns

Get up to $1,000 for emergencies

Send money to anyone in the US

Save big on auto insurance - compare quotes now!

Zip Code:
Zip Code: