1099-NEC Forms Are Due to Non-Employees No Later Than January 31, 2025

Which Form to Report Income—W-2 or 1099-NEC?

The difference between these forms is straightforward:

• Form W-2: Used to report compensation paid to an employee of an organization.
• Form 1099-NEC: Used to report nonemployee compensation paid to an independent contractor.

Key Differences:

• Employers who withhold payroll taxes issue Form W-2 to their employees.
• Businesses use Form 1099-NEC to report payments to people or companies who provide services but are not classified as employees.

Updates to Reporting Nonemployee Compensation

Since Tax Year 2020, you must use Form 1099-NEC, Nonemployee Compensation, to report payments of nonemployee compensation (NEC) previously reported in box 7 on Form 1099-MISC,” said Daniel Ahart, chief tax officer at the tax preparation company Daniel Ahart Tax Service®.

When to Use Form 1099-NEC:

• Report payments of $600 or more for services performed by a nonemployee during your trade or business.
• Report payments of $10 or more for gross royalties or $600 or more for rents or other specified purposes in the course of a trade or business.

Form 1099-NEC serves to:

• Report payment information to the IRS.
• Notify the person or business receiving the payment about the income reported.

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