What 1099 Form Do I Use for Vendors: NEC or MISC?

Use Form 1099-NEC for vendors who performed services for your business, and Form 1099-MISC for other reportable payments such as rent, royalties, healthcare, and settlement proceeds paid through an attorney. Starting with payments made after December 31, 2025, the reporting threshold for most boxes on both forms is $2,000, up from the longstanding $600 figure, under the One Big Beautiful Bill Act.¹ A few categories still use lower thresholds, and one vendor can receive both forms in the same year.

The Core Distinction: Services vs. Everything Else

The simplest test is what the payment was for. Did the vendor perform work for your business? Use Form 1099-NEC. Did the vendor receive money for something other than their own services, such as rent on your office, a royalty on a product, or settlement funds passed through their trust account? Use Form 1099-MISC.²

A single vendor can receive both forms in the same year. The clearest example is a law firm. If you pay the firm for legal services, those fees go on Form 1099-NEC. If the firm also receives settlement funds on behalf of your business’s counterparty and passes those funds through, the gross proceeds go on Form 1099-MISC, Box 10.²

When to Use Form 1099-NEC

Form 1099-NEC covers nonemployee compensation. If a non-employee performed services for your business in the course of your trade or business, and you paid them $2,000 or more during the calendar year, the total goes in Box 1 of the 1099-NEC.¹ The statutory basis is 26 U.S.C. § 6041A.³

Common recipients include freelancers, independent contractors, consultants, and subcontractors. Director fees, golden parachute payments, and fees paid to attorneys for legal services also go on the 1099-NEC. Attorney fees are reported here even when the law firm is incorporated.²

The 1099-NEC replaced the old Box 7 of the 1099-MISC beginning with tax year 2020. Older guidance directing you to report contractor payments on the MISC form is out of date.

When to Use Form 1099-MISC

Form 1099-MISC handles non-service payments. Each box has its own rules, and the thresholds are not all the same for 2026.¹

Box 1, Rents: $2,000 or more, including office space, equipment, and pasture land.
Box 2, Royalties: $10 or more. This threshold did not change.
Box 3, Other income: $2,000 or more for prizes, awards, and other income not covered elsewhere.
Box 6, Medical and healthcare payments: $2,000 or more to physicians and other healthcare providers, including payments from health and accident insurance plans.²
Box 10, Gross proceeds paid to an attorney: $600 or more in connection with legal services but not for the attorney’s own fees. This threshold also did not change.

If you paid a freelance web designer $1,800 in 2026, no 1099-NEC is required because you are under $2,000. Pay a landlord $1,800 in royalties, and you still owe a 1099-MISC because Box 2 uses the $10 floor. Beginning in 2027, the $2,000 figure will adjust annually for inflation.¹

Which Vendors Actually Need a 1099

Only payments made in the course of your trade or business trigger reporting. Personal expenses, like hiring a contractor to remodel your own kitchen, do not count.⁴

Beyond that, the vendor’s tax classification decides whether you file. You report payments to sole proprietors, partnerships, and LLCs that have not elected corporate status. You generally do not report payments to C-corporations, S-corporations, or LLCs that have elected to be taxed as a corporation.⁴ You confirm the classification by collecting a Form W-9 at the start of each vendor relationship.⁵

Two categories override the corporate exemption:

Legal services. Attorney fees are reported on Form 1099-NEC regardless of whether the firm is incorporated.
Medical and healthcare payments. Payments to physicians, medical corporations, and other healthcare providers are reported on Form 1099-MISC even if the provider is incorporated. The exception does not extend to tax-exempt hospitals or government-owned facilities.²

Foreign vendors sit outside this framework. A nonresident alien or foreign entity should provide a Form W-8BEN or W-8BEN-E rather than a W-9, and their payments are handled under the chapter 3 withholding rules rather than 1099 reporting.⁶

Payments You Should Not Report on Either Form

Do not include amounts you paid by credit card, debit card, or third-party payment network like PayPal or Venmo. The payment settlement entity reports those on Form 1099-K, and the IRS instructions state the amounts “are not subject to reporting on Form 1099-MISC or Form 1099-NEC.”²

In practice, count only payments made by check, ACH, wire, or cash. If you paid a contractor $5,000 through Venmo and $3,000 by check, only the $3,000 belongs on the 1099-NEC. The 1099-K threshold for third-party settlement organizations reverted to more than $20,000 and more than 200 transactions under the One Big Beautiful Bill Act.⁷

Deadlines Differ Between the Two Forms

Form 1099-NEC has one deadline for everything: January 31 for both the recipient copy and the IRS copy. No automatic extension is available.¹

Form 1099-MISC has a split schedule. Recipient copies are generally due January 31, though forms reporting amounts in Box 8 or Box 10 have a recipient deadline of February 15. The IRS copy is due February 28 on paper or March 31 electronically.¹

Electronic filing is mandatory once you file 10 or more information returns of any type combined across the year. Four Forms 1098 and six Forms 1099-NEC put you at the threshold, and all of them must be e-filed.⁸ The IRS Information Returns Intake System (IRIS) is the current e-filing platform.⁹ If you file on paper under the 10-return count, include Form 1096 as a transmittal for each type of 1099 in the batch.¹⁰

Penalties for Filing the Wrong Form or Filing Late

Penalties are assessed per form and scale with how late you file. For returns due in 2026:

Up to 30 days late: $60 per form.
31 days late through August 1: $130 per form.
After August 1 or never filed: $340 per form.
Intentional disregard: $680 per form with no maximum cap.

The same amounts apply to incorrect or incomplete payee statements, which is where a wrong form choice can hurt you.¹¹ Small businesses with average annual gross receipts of $5 million or less qualify for reduced maximum caps, but intentional disregard has no ceiling regardless of business size. States may add their own penalties on top.

Keep copies of filed 1099s and supporting records for at least three years from the filing date.¹²

1
Internal Revenue Service. 2026 Publication 1099 General Instructions for Certain Information Returns
2
Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
3
Office of the Law Revision Counsel. 26 USC 6041A – Returns Regarding Payments of Remuneration for Services and Direct Sales
4
Internal Revenue Service. Am I Required to File a Form 1099 or Other Information Return
5
Internal Revenue Service. Form W-9 Request for Taxpayer Identification Number and Certification
6
Internal Revenue Service. Instructions for Form W-8BEN
7
Internal Revenue Service. IRS Issues FAQs on Form 1099-K Threshold Under the One Big Beautiful Bill
8
Internal Revenue Service. General Instructions for Certain Information Returns
9
Internal Revenue Service. E-file Information Returns With IRIS
10
Internal Revenue Service. About Form 1096, Annual Summary and Transmittal of US Information Returns
11
Internal Revenue Service. Information Return Penalties
12
Internal Revenue Service. How Long Should I Keep Records