What is the difference between Form 1099 K and Form 1099 NEC?
These tax forms look similar but they have different purposes. Understanding the differences between these forms is important to accurately report your income for this year’s tax season. Let’s take a look at the differences.
Form 1099-NEC and Form 1099-K both report income.
Form 1099-NEC and Form 1099-K report the business income you received during the tax year. You and the IRS receive both forms, but there are some key differences.
The purposes of the forms are different.
Businesses send
Form 1099-NEC, Nonemployee Compensation
, if you earn at least $600 in freelance work or contract labor during the year. You may receive more than 1099-NEC depending on how many clients were in your tax year. Your 1099 form will tell you how much each client paid you in the tax year. ), these institutions may also send you
Form 1099-K, Payment Card and Third Party Network Transactions
. This form shows you your total bank card revenue during the year. You may receive more than one 1099-K if your gross receipts exceed the reporting threshold on multiple platforms. You may receive more than one 1099-K if your gross receipts exceed the reporting threshold in multiple platforms.Note: The payment threshold for Form 1099-K will drop to $2,500 in 2025 and $600 in 2026, according to the latest IRS guidance.
In other words, Form 1099-NEC reports income from a particular business, regardless of the form of payment. Form 1099-K reports bank card and payment app income from all your customers and clients.Corporation requirements aren’t the same.Businesses are generally not required to send you Form 1099-NEC if your business is incorporated and treated as an S corporation or a C corporation. Financial institutions must send Forms 1099-K to any business that has bank card revenue regardless of whether it is incorporated. Non-profit organizations also receive Form 1099-K.
Income can be reported twice.Sometimes income can show up twice — on Form 1099-NEC and Form 1099-K. For example, let’s say you clean carpets for a large business and earned $35,000 last year. You can also accept credit card payments via an app such as Square(r). Square sent you a Form 1099-NEC indicating the payments made by the companies you cleaned for. But because you received some payments via credit card, Square also sent you Form 1099-K reporting those payments.
This is why keeping good records is essential — to avoid paying income and self-employment tax on the same money twice. Always check your 1099 forms against your own records to ensure you report your income correctly.
You may notice discrepancies with Form 1099-K.
Form 1099-K shows the gross amount of income paid by your customers. You will receive a lower amount after the bank card processing fee is deducted. However, you do not pay tax on this gross amount. Report your fees and expenses on your income taxes to calculate your tax on the basis of your net income. The good news is that filing with TaxAct(r) can help you make those calculations easy, so you don’t have to wonder if you’re overpaying in taxes. Filing with TaxAct(r) can help make those calculations easy, so you don’t have to wonder if you’re overpaying in taxes.
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