Hiring an independent contractor for your business can mean reduced paperwork and fewer tax payments. However, you’ll need to use 1099 forms. For small business owners who use independent contractors, you’ll use Form 1099-NEC to report payments.
What about the 1099-MISC form? Form 1099-MISC reports other miscellaneous income, like rent and prizes. Note that before 2020 you’d use this form to report payments to independent contractors—that’s no longer the case.
Let’s compare these 1099 forms and see which one you need. We’ll outline the key difference between 1099-MISC vs. 1099-NEC forms, as well as the steps to file them correctly: