What is the difference between a Form W-2 and a Form 1099-MISC/NEC?

Although both of these forms are called information returns, they serve different functions.

Employers use Form W-2, Wage and Tax Statement to:

  • Report wages, tips, and other compensation paid to an employee.
  • Report the employee’s income and social security taxes withheld and other information.
  • Report wage and withholding information to the employee and the Social Security Administration. The Social Security Administration shares the information with the Internal Revenue Service.

Payers use Form 1099-MISC and 1099-NEC to:

  • Report payments made in the course of a trade or business to a person who’s not an employee or to an unincorporated business.
  • Report payments of $10 or more in gross royalties or $600 or more in rents or compensation. Report payment information to the IRS and the person or business that received the payment.

Are payments made to a corporation reportable on a 1099-MISC and 1099-NEC form?

Generally, payments to a corporation (including a limited liability company (LLC) that is treated as a C or S corporation) are not reportable.  However, the following payments made to corporations generally must be reported on Form 1099-MISC.

    • Medical and health care payments reported in box 6, 1099-MISC.
    • Fish purchases for cash reported in box 1, 1099-NEC.
    • Attorneys’ fees reported in box 1, 1099-NEC.
    • Gross proceeds paid to an attorney reported in box 10, 1099-MISC.
    • Substitute payments in lieu of dividends or tax-exempt interest reported in box 8, 1099-MISC.
    • Payments by a federal executive agency for services (vendors) reported in box 1, 1099-NEC.

For additional information see the Instructions for Forms 1099-MISC and 1099-NEC.

What is nonemployee compensation and when is it reportable on a 1099-MISC form?

Nonemployee compensation is a payment for services to a company or a person that is not an employee.

The IRS says that nonemployee compensation is generally reportable on a 1099-NEC form when:

  • You made the payment to someone who is not your employee.
  • You made the payment for services in the course of your trade or business (including government agencies and nonprofit organizations).
  • You made the payment to an individual, partnership, estate, or, in some cases, a corporation.
  • You made payments to the payee of at least $600 during the year.

1099-NEC, Box 1. Nonemployee Compensation

Enter nonemployee compensation (NEC) of $600 or more. Include fees, commissions, prizes and awards for services performed as a nonemployee, other forms of compensation for services performed for your trade or business by an individual who is not your employee, and fish purchases for cash. Include oil and gas payments for a working interest, whether or not services are performed. Also include expenses incurred for the use of an entertainment facility that you treat as compensation to a nonemployee. Federal executive agencies that make payments to vendors for services, including payments to corporations, must report the payments in this box. See Rev. Rul. 2003-66.

For additional information see the Instructions for Form 1099-MISC 

Where can I find help from the IRS on issuing 1099 forms?

The IRS has several resources to assist businesses in issuing 1099 forms.  Click on the following to access the resources.

General Instructions for Certain Information Returns – This provides general instructions for all 1099 forms.

Instructions for Forms 1099-MISC and 1099-NEC – This provides specific instructions for completing the 1099-MISC and 1099-NEC forms.

About Form 1099 – An IRS.gov page that provides additional information and links to most 1099 form instructions.