We’ve talked a lot about the differences between Forms 1099-MISC and 1099-NEC. But are there instances where you’d need to file both?
1099-NEC and 1099-MISC
The 2021 drafts for 1099-NEC and 1099-MISC have been out since late last year. The goal of reintroducing the 1099-NEC (last used in 1982) was to keep non-employee expenses separate from the 1099-MISC.
As more and more businesses rely on independent contractors and freelancers, the 1099-NEC will become more widely used in the future.
When to File Only 1099-NEC
If you have payments totaling more than $600 to a non-employee, which includes any person or business hired as an independent contractor or freelancer, you’ll need to fill out the Form 1099-NEC.
Here are a few other eFile360 blog resources that talk about how the 1099-NEC works:
When to File Only 1099-MISC
Your business will need to file a 1099-MISC for every independent contractor you have paid more than $600 within the tax year for anything other than non-employee compensation. You’ll fill out the 1099-MISC after you request and receive that independent contractor’s W-9.
Some main items reported on the 1099-MISC include:
- Proceeds from a fishing boat
- Substitute payments made instead of paying interest or dividends
- Payments for medical and healthcare
- Crop insurance proceeds
- Gross proceeds paid to a lawyer
- Excess golden parachute payments
For more resources to help with your 1099-MISC filing, check out these eFile360 blog articles:
When Do I Need to File Both?
In some cases, you may be required to fill out both 1099-NEC and 1099-MISC. In these cases, you will have paid an independent contractor or freelancer more than $600 throughout the year either for services or parts and materials, while also paying:
- Other workers
- Separate non-employee payments that include things like rent, prizes, awards
- Other income payments
- Fishing boat proceeds
- Medical and healthcare payments
- Crop insurance payments
- Legal services payments (not legal fees)
- Nonqualified deferred compensation
Since certain forms of income are specific to these separate forms, you may run into situations like the following.
Let’s say you paid attorney fees and won a lawsuit in the current tax year. You’d use the 1099-NEC to report any payments you made pertaining to attorney fees (because you hired an independent contractor to do business for you), but any gross proceeds over the $600 minimum that you were awarded will be reported on a 1099-MISC, resulting in the need for you to fill out both forms to report your income and expenses attached to your lawsuit.
If you are still unsure about which form to use, check out our handy resources that can help you determine which forms to use and also let you know when the deadlines are for each 1099, 1098, and ACA form you need prepared.
E-File Your 1099s This Year
With eFile360, you can file your 1099s in three steps:
- Sign up for a free eFile360 account.
- Choose your form type and enter or upload your form details
- Complete your purchase and place your order
Sign up today and let us help you with your 1099s!