1099-K vs 1099-NEC: What's the Difference?

January is tax form season. If you are a freelancer or small business owner, you will likely receive a flurry of forms. The two most common are the 1099-NEC and the 1099-K. It's critical you understand both.

Form 1099-NEC (Nonemployee Compensation)

This form replaced the old 1099-MISC box 7 in 2020. You will receive a 1099-NEC from any client or business who paid you $600 or more during the year via cash, check, or direct deposit.

If you perform a freelance project and bill a client, and they mail you a check for $1,000, they are required by the IRS to issue you a 1099-NEC reporting that $1,000.

Form 1099-K (Payment Card and Third Party Network Transactions)

The 1099-K is issued by third-party payment settlement entities—like PayPal, Stripe, Venmo, or Etsy. If a client pays your invoice using a credit card through Stripe, the client does not issue you a 1099-NEC. Instead, Stripe issues you a 1099-K.

The Reporting Threshold Changes

The IRS has been attempting to lower the 1099-K reporting threshold to $600 (down from $20,000 and 200 transactions), but this has been repeatedly delayed and phased-in. Regardless of whether you receive the form, the IRS still requires you to report all business income, regardless of the amount or how it was paid.