1099 NEC VS 1099 MISC: Comparison & Best Tools for Editing

There are many types of Form 1099. Two of them are 1099-NEC (Nonemployee Compensation) and 1099-MISC (Miscellaneous Income). They are both information reporting forms used by businesses. The purpose is to report various types of payments made to individuals or entities other than employees. But what are the differences? Here, we will discuss 1099 NEC vs 1099 MISC. With this guide, you will be able to identify which one you need.

Viewing or printing your submitted Form 1099 may also be recommended for record keeping. For this, Wondershare PDFelement is the best tool to use.

Part 1. Differentiating 1099 MISC and 1099 NEC: What Is a 1099 NEC?

Let us first discuss what a 1099-NEC is. NEC stands for Nonemployee Compensation. From that, you can understand what it is for. This form is used to report payments of $600 or more made to nonemployees for services performed in the course of your trade or business.

This form was reintroduced in the tax year 2020. It separates nonemployee compensation from other miscellaneous income that was previously reported on Form 1099-MISC.

Who can you consider as "nonemployees" that require you to file a 1099 NEC? This category includes independent contractors, freelancers, consultants, and self-employed individuals. As long as they are not your employees but helped you with a project, they are qualified.

Here are some scenarios when a Form 1099-NEC is what's needed:

Independent Contractors

Suppose you hire independent contractors, freelancers, consultants, or other self-employed individuals to perform services for your business. You paid them $600 or more during the tax year. In that case, you are required to issue them a Form 1099-NEC.

Professional Services

Your business would often seek help from attorneys, accountants, architects, and engineers. The payment could easily go above $600 in the tax year. This would typically require a Form 1099-NEC.

Contract Labor

If your business hires individuals or other businesses on a contract basis to perform specific tasks, a Form 1099-NEC may be needed. Construction work, repair services, maintenance, or other labor-related services are prime examples in this category.

Part 2. Differentiating 1099 MISC and 1099 NEC: What Is a 1099 MISC?

A Form 1099-MISC is used to report payments of $600 or more for services performed by someone who is not your employee. But only if those payments are not for nonemployee compensation. Meaning, this form is used to report various types of miscellaneous income. That includes rent, royalties, prizes, and awards. Crop insurance proceeds, healthcare payments, and other types of income also fall under this category.

In the past, Form 1099 was also the form used for nonemployee compensation. However, nonemployee compensation reporting has now been shifted to Form 1099-NEC. Thus, Form 1099-MISC is now primarily used for other types of miscellaneous income.

Here are a few examples of scenarios when you would need a Form 1099-MISC:

Rent Payments

Some businesses use rental spaces like rental offices or studios. Also, your business may need to rent equipment. Suppose the owner is an individual or entity not classified as an employee. Plus, you pay $600 or more in rent for business property. You must issue a Form 1099-MISC.

Royalty Payments

Payments totaling $10 or more in royalties for the use of intellectual property require the issuance of a Form 1099-MISC. This includes patents, copyrights, or trademarks.

Healthcare Payments and Legal Services

You need to issue a 1099-MISC for healthcare payments of $600 or more. The recipient must be physicians, medical providers, or other healthcare professionals for medical or healthcare services. These individuals and entities must not be your employees.

The same goes for legal services. If you paid attorneys, law firms, or legal service providers $600 or more for legal services, issuing a 1099-MISC is required.

Part 3. 1099 MISC VS 1099 NEC: Direct Comparison

The key distinction between Form 1099-NEC and Form 1099-MISC lies in the reported income type. Form 1099-NEC is specifically for reporting nonemployee compensation. Meanwhile, Form 1099-MISC is used for reporting a wider range of miscellaneous income.

Suppose payments are made to individuals or entities for services performed as independent contractors or freelancers meet the $600 threshold. You should report them on Form 1099-NEC. For payments for other types of income, such as rent, royalties, or healthcare payments, you report them using Form 1099-MISC.

Determining the correct form to use is crucial to ensuring compliance with IRS reporting requirements. This helps you avoid potential penalties for incorrect or late filing.

Part 4. How To Fill and Submit 1099 NEC and 1099 MISC Forms

Here are simple guides on how to fill and submit 1099-NEC and 1099-MISC Forms.

1099-NEC

First, get a copy of Form 1099-NEC. You can get it from four different sources. You can get it from the IRS and your business accounting program. Likewise, you can get a Form 1099-NEC from the personnel in your company that's responsible for preparing the taxes.

After obtaining the form, do this:

1. Add the payer's (your) information. The information needed includes your name, address, and contact number.
2. Enter your and the payment recipient's TIN.
3. If you gave the contractor an account number, write it on the form. Otherwise, skip this step.
4. Fill out Box 1 with the full amount of payments you gave to the recipient during the year.
5. Put an X on box 2 if you made direct sales of $5,000 or more.
6. If you withheld any federal income tax from the contractor’s wages, state the amount in box 4.
7. Submit the Form to the IRS.

Please note that you have to fill out boxes 5 - 7 on the copy you send to the recipient and the state.

1099-MISC

Same with the 1099-NEC, the first step is to grab a copy of Form 1099-MISC. You can get it from the same people or entities that can give you a Form 1099-NEC. Note that the file will contain multiple copies of the form. Copy A is what you send to the IRS.

1. Input your name, address, and phone number.
2. Input your TIN and the recipient's TIN.
3. Enter the recipient’s name and address.
4. If applicable, input your account number.
5. Fill the applicable boxes with the totals of your payment.

For a more thorough guide, please check this: IRS’s Form 1099-MISC Instructions.

Part 5. Best Tool for Viewing and Printing 1099 NEC 1099 MISC: Wondershare PDFelement

Filling and submitting Form 1099 NEC and Form 1099 MISC are done online. But after submitting the forms, you can download them. That is great for record keeping.

You can use a PDF tool to view and print your submitted 1099 forms. Wondershare PDFelement is the best option, especially with its improved Print feature. It offers Collated printing. Furthermore, Wondershare PDFelement is also great for PDF viewing; you can find many View layouts. The best thing is that the View and Print tools of Wondershare PDFelement are among its free features.

Here's how to open your 1099-NEC and 1099-MISC Forms with Wondershare PDFelement.

1. Open Wondershare PDFelement and click Open PDF.
2. Select your 1099-NEC or 1099-MISC file.
3.  Click View and select your preferred layout for viewing the file.

For printing the file:

1. Click the Print icon on the top left of the screen.

2. Set how many copies you want to print.
3. Check Collate.

4. Click Print.

With the Collate feature, you don't have to arrange the pages after printing. How collated printing works is it prints all the pages of the document once before starting over. That's different from the usual process where page 1 will be printed many times until it's equal to the desired number of copies before printing page 2. Since the pages were stacked like that, you had to rearrange the pages.

Conclusion

Form 1099-MISC and Form 1099-NEC used to be one document: Form 1099-MISC with NEC. But they had been split in 2020. Form 1099-MISC is now for other payments to nonemployees that are not considered compensation. Meanwhile, as the form name implies, Form 1099-NEC is the document for nonemployee compensation.

 You may want to download a copy of your submitted documents. Wondershare PDFelement is a great tool for viewing them. Wondershare PDFelement offers different viewing layouts, so you can adjust it to whatever makes you most comfortable. Furthermore, it offers Collated Printing, which saves time when printing multiple copies of a document.