The Internal Revenue (IRS) has multiple 1099 forms, each for a different type of non-employment income. The 1099-MISC and 1099-NEC tax forms are records of earned income that is not part of your salary or wages from an employer.
The 1099-MISC used to be the primary tax form for all non-employment earnings before 2020. However, the IRS created the 1099-NEC in 2020 to distinguish money earned through independent contractor services from other sources of income. You can no longer use the 1099-MISC form to report self-employed income, canceled debt, or scholarships.
You’ll use any 1099 forms you receive to complete your taxes and report your earnings in different places on your return. For example, an entity may send you a 1099-MISC form if you collect royalties. Or, a client may send you a 1099-NEC for freelance work they paid you for.
Every 1099 tax form has your taxpayer identification number (TIN), so the IRS is already aware of your earnings as reported on the document. The IRS can send a CP2000 if your tax return does not match the reported earnings, which is a notice of underreporting and can result in penalties.
Table of Contents
When You’ll Get Form 1099-MISC, Miscellaneous Income
You may receive a 1099-MISC if you earned at least $600 from any of the following sources:
- Rental properties
- Income that does not apply to other 1099 forms, like awards and prizes
- Medical and health care payments
- Crop insurance proceeds
- Services as an attorney
Additionally, you may receive the form if you earned:
- At least $10 from royalties
- Any amount from fishing boat proceeds
- At least $10 from broker payments instead of dividends or interest payments
The 1099-MISC tax form also covers other financial transactions. Any person, employer, or entity that withheld federal income tax on your behalf will also generally send you a 1099-MISC. This may occur if the payer did not have your TIN before the payments.
Sections on a 1099-MISC
The 1099-MISC form is broken down into different boxes, each one pertaining to a different type of income.
- Box 1 – Rental payments
- Box 2 – Royalties
- Box 3 – Other income that does not apply to other 1099 forms
- Box 4 – Any federal income tax withheld already (if any has been withheld)
- Box 5 – Fishing boat proceeds
- Box 6 – Medical and health care payments
- Box 7 – Check this box if a payer sold more than $5,000 of consumer products to you for resale
- Box 8 – Broker payments totaling at least $10
- Box 9 – Crop insurance proceeds
- Box 10 – Attorney services
- Box 11 – Payments for the resale of fish and other aquatic life totaling at least $600
- Box 12 – Section 409A deferrals of at least $600
- Box 13 – FATCA filing requirement
- Box 14 – Excess golden parachute payments
- Box 15 – Nonqualified deferred compensation
Boxes 16 through 18 are for information about your state taxes, such as tax withheld or payments made.
Tips on Using Form 1099-MISC to File Your Federal Tax Return
You will need the information contained on Form 1099-MISC to file your income tax return. This typically involves submitting a Form 1040, the most commonly used tax form for individuals.
Depending on the type of income you earn, you may have one or more boxes completed or checked off on your 1099-MISC. Completing certain boxes might require you to take certain steps when it is time to file your tax return.
| Box Completed or Checked | Additional Form or Action Needed |
|---|---|
| Box 1 | Attach Schedule E, Supplemental Income and Loss, to Form 1040 to report rent or Schedule C, Profit or Loss From Business (Sole Proprietorship) to Form 1040 if you rented property as a business, sold property as a business, or provided significant services for the tenant |
| Box 2 | Attach Schedule E, Supplemental Income and Loss, to Form 1040 |
| Box 3 | Attach Schedule 1 to Form 1040 to identify the payment type, such as a prize or taxable damages |
| Box 4 | Report this amount on Line 25 B of your 1040 |
| Box 5, 6, or 7 | Attach Schedule C, Profit or Loss From Business (Sole Proprietorship) to Form 1040 |
| Box 8 | Attach Schedule 1 to Form 1040 |
| Box 9 | Attach Schedule F, Profit or Loss From Farming, to Form 1040 |
| Box 10 | Report this amount as income |
| Box 11 | Attach Schedule C, Profit or Loss From Business (Sole Proprietorship) to Form 1040 |
| Box 12 | For informational purposes only, no action needed |
| Box 13 or 14 | Attach Schedule 2 to Form 1040 |
| Box 15 | Report this amount as income |
When You’ll Get Form 1099-NEC, Nonemployee Compensation
While employers send traditional employees W-2 forms, clients and companies that paid you at least $600 as an independent contractor will send you a 1099-NEC. The IRS introduced the 1099-NEC form in 2020 and redesigned the 1099-MISC to exclude nonemployee compensation.
Sections on a 1099-NEC
Just like the 1099-MISC, the 1099-NEC form is broken down into different boxes. However, there aren’t nearly as many boxes because the 1099-NEC is solely meant to report one primary type of income: nonemployee compensation.
- Box 1 – Total amount of nonemployee compensation paid to you
- Box 2 – Products for resale totaling $5,000 or more
- Box 3 – Blank; the IRS may use this box in the future
- Box 4 – Any federal income tax withheld (if any has been withheld)
- Box 5 – Any state income tax withheld (if any has been withheld)
- Box 6 – Abbreviated state name and state ID number if the payer withheld state tax
- Box 7 – State income
Tips for Using Form 1099-NEC to File Your Taxes
You will need the information contained on Form 1099-NEC to file your income tax return. This typically involves submitting a 1040, the most commonly used tax form for individuals.
Depending on the type of income you earn, you may have one or more boxes completed on the form. Completing certain boxes might require you to take certain steps when it is time to file your tax return.
| Box Completed | Additional Form or Action Needed |
|---|---|
| Box 1 | If this income is from self-employment, report it on Schedule C, Profit or Loss From Business (Sole Proprietorship) or Form 1040 |
| Box 2 | Attach Schedule C, Profit or Loss From Business (Sole Proprietorship), to Form 1040 |
| Box 4 | Report this amount on Line 25 B of your 1040 |