In the 1099-NEC vs 1099-MISC split, the 1099-NEC reports nonemployee compensation: fees, commissions and pay for services by someone who is not an employee. The 1099-MISC reports most other business payments, such as rents, royalties, prizes not tied to services, medical payments and gross proceeds paid to an attorney. For tax year 2026, most of these thresholds are $2,000.
What belongs on a 1099-NEC and what belongs on a 1099-MISC
The 1099-NEC and the 1099-MISC divide payments by what the money was for. A payment for services performed by a nonemployee goes on the 1099-NEC in box 1a. A payment that is not for services, such as rent, a royalty or a prize, goes on the 1099-MISC in the box that names it.
The IRS Instructions for Forms 1099-MISC and 1099-NEC (Rev. December 2026) list the 1099-NEC box 1a examples as professional service fees "to attorneys (including corporations), accountants, architects, contractors, engineers," along with fees, commissions, prizes and awards for services performed as a nonemployee. If the person did work for the business and is not on payroll, the payment is usually a 1099-NEC question.
The 1099-MISC holds everything else the instructions assign to it. Box 1 is rents. Box 2 is royalties. Box 3 is other income, which the instructions say includes "prizes and awards that are not for services performed," such as a sweepstakes win that did not involve a wager. Box 6 is medical and health care payments. Box 9 is crop insurance proceeds. Box 10 is gross proceeds paid to an attorney. Box 11 is fish purchased for resale.
The prize example shows how the test works. A prize for winning a sales contest the vendor entered by doing work is a payment for services, so it fits the box 1a wording: "prizes and awards for services performed as a nonemployee." A prize from a drawing open to the public is not for services, so it goes in 1099-MISC box 3. Same word, two forms.
Payments to corporations are generally not reportable on either form. The instructions carve out exceptions. On the 1099-NEC, attorneys' fees stay reportable even when the law firm is a corporation. On the 1099-MISC, medical and health care payments, substitute payments, fish purchased for resale and gross proceeds paid to an attorney stay reportable to corporations as well.
Ten common payments and where they go
This table uses example payments to a fictional client, Juniper Street Bakery LLC, for the 2026 tax year. Forms, boxes and thresholds come from the December 2026 revision of the IRS instructions for both forms.
| Example payment | Form | Box | Threshold |
|---|---|---|---|
| Freelance designer, $4,800 for a new menu | 1099-NEC | 1a, Nonemployee Compensation | $2,000 |
| Law firm, $3,200 for a lease review | 1099-NEC | 1a, Nonemployee Compensation | $2,000 |
| Settlement check, $15,000 paid to the other side's attorney | 1099-MISC | 10, Gross Proceeds Paid to an Attorney | $600 |
| Landlord, $36,000 for the storefront | 1099-MISC | 1, Rents | $2,000 |
| Equipment owner, $2,400 to rent a commercial mixer | 1099-MISC | 1, Rents | $2,000 |
| Recipe author, $450 in royalties | 1099-MISC | 2, Royalties | $10 |
| Customer raffle winner, $2,500 prize | 1099-MISC | 3, Other Income | $2,000 |
| Occupational health clinic, $2,100 | 1099-MISC | 6, Medical and Health Care Payments | $2,000 |
| Sales contest prize to an outside rep, $2,200 | 1099-NEC | 1a, Nonemployee Compensation | $2,000 |
| Plumber paid $3,000 by credit card | Neither | Reported on Form 1099-K by the card processor | n/a |
The last row is the one most ledgers get wrong, and it has its own section below.
Is rent reported on a 1099-NEC or a 1099-MISC?
Rent is reported on the 1099-MISC, box 1, not the 1099-NEC. The IRS instructions say to enter "$2,000 or more for all types of rents," and the examples they give are office space, machine rentals and pasture rentals. Rent pays for the use of property, not for someone's services, which is why it stays off the 1099-NEC.
Equipment leases fall in the same box. The instructions use renting a bulldozer to level a parking lot as their machine rental example. For a bakery client, a rented mixer, a leased refrigerated trailer or a rented booth at a market are all rent in box 1, provided the payment reaches the threshold and the landlord is not a corporation.
Property managers change who files. The instructions say a business that pays rent to a real estate agent or property manager generally does not report it. The agent or manager reports the rent it pays over to the property owner, on its own 1099-MISC box 1. A client who sends rent to a management company is usually not the filer for that rent.
Mixed bills need splitting. A landlord who also charges for repairs, or a contractor who rents out equipment with an operator, sends one invoice that may cover two kinds of payment. The ledger entry should show the parts separately, because rent and services land on different forms. Ask for an itemized invoice when the line on the bill does not say.
Rent paid to a landlord who is a corporation is generally not reportable, because rent is not on the instructions' list of exceptions for corporations. The W-9 the landlord returned shows its tax classification, and the post on building the vendor list and collecting W-9s covers getting one from every payee before January.
Attorney payments split between the 1099-NEC and 1099-MISC
Attorney payments split between the 1099-NEC and 1099-MISC by what the money paid for. Fees for the attorney's own legal services go in 1099-NEC box 1a at $2,000 or more. Gross proceeds paid to an attorney, such as a settlement amount that passes through the attorney to someone else, go in 1099-MISC box 10 at $600 or more.
The IRS instructions are direct about the difference. Gross proceeds are amounts paid "in connection with legal services, but not for the attorney's services." A settlement check made out to the claimant's attorney is the common case. The attorney did not earn the whole amount; it was paid through them.
Both rules apply to law firms set up as corporations. Most payments to corporations drop off the 1099 forms, but attorneys are an exception on both. A ledger that skips every payee marked "Inc." or "PC" will miss legal fees and settlement payments that the instructions still require.
The thresholds differ, and that matters at year-end. A $900 settlement paid to an attorney clears the $600 box 10 threshold. A $900 legal fee does not clear the $2,000 box 1a threshold. Classifying both as "legal" in the ledger hides that difference, so a separate account or class for settlements makes the 1099 review shorter.
One payment can need both forms. When a single check covers a settlement and the attorney's fee for the business's own representation, the fee portion and the proceeds portion are different payments. Ask the law firm for a breakdown before filing.
When are the 1099-NEC and 1099-MISC due?
For 2026 forms, the 1099-NEC and 1099-MISC are both due to recipients by January 31. The 1099-NEC is also due to the IRS by January 31. The 1099-MISC is due to the IRS by February 28 on paper or March 31 when filed electronically. Thresholds rose to $2,000 for most boxes for tax years beginning after 2025.
The IRS Instructions for Forms 1099-MISC and 1099-NEC state these dates for 2026 information filed in early 2027. The earlier IRS deadline on the 1099-NEC is the one that catches firms out. There is no extra month for the IRS copy, so the vendor list has to be final before the end of January.
Current reporting thresholds
The same instructions say the minimum threshold for certain payments "increased to $2,000 and may be adjusted for inflation beginning in calendar year 2027." That change covers nonemployee compensation in 1099-NEC box 1a and, on the 1099-MISC, rents, other income, medical and health care payments and crop insurance proceeds.
Not every box moved. Royalties in box 2 and substitute payments in box 8 stay at $10. Gross proceeds paid to an attorney in box 10 stay at $600. Fish purchased for resale in box 11 stays at $600 in cash payments. Direct sales of $5,000 or more of consumer products for resale are a checkbox, box 7 on the 1099-MISC or box 2 on the 1099-NEC.
Older checklists still say $600 for everything. A firm that copies last year's year-end letter forward will ask clients for 1099s they no longer need to issue, and may miss the ones whose thresholds did not change. The year-end bookkeeping checklist for clients is where the updated numbers belong.
Classifying ledger payments for the 1099-NEC: card payments to leave off
Classifying ledger payments for the 1099-NEC starts with how each payment was made. The IRS instructions say payments made with a credit card, debit card or through a third party payment network are reported on Form 1099-K by the payment settlement entity, not on the 1099-MISC or 1099-NEC. Those payments come off the vendor totals.
The mistake looks like this. A client pays a contractor $6,000 during the year: $2,500 by check and $3,500 through a card. The general ledger shows $6,000 under the contractor's name. If the firm reports the full $6,000 in box 1a, the $3,500 is reported twice: once by the client on the 1099-NEC and once by the card processor on a 1099-K.
The fix is in the payment method, not the vendor name. Filter the vendor's ledger lines by account. Payments drawn from a checking account, by ACH or by check, stay in the 1099-NEC total. Payments posted against a credit card account, or through a payment app, are taken out. In the example, the 1099-NEC shows $2,500, which is above the $2,000 threshold, so the form is still required.
Shift the mix and the answer changes. A contractor paid $1,900 by check and the rest by card falls below the threshold for the client's own 1099-NEC, even though the total paid was well over $2,000.
The source documents settle the question. Bank statements show which payments cleared as checks or transfers. Credit card statements show which cleared on the card. Schema CPA reads both kinds of statement along with the client's general ledger and exports them to Excel or CSV, so a payment can be traced to the account it was paid from. The document types Schema CPA reads are listed on the homepage.
Payroll is the other line to remove. Wages to employees go on the W-2, not the 1099-NEC, so payroll accounts drop out of the vendor review entirely. Payroll figures come from stubs and provider reports, and the post on pay stub OCR covers reading them. Interest the client paid on a mortgage is also not a 1099 question for the payer; the lender reports it, as the post on the Form 1098 mortgage interest statement explains.
A short pass before filing catches most errors:
- Remove employee wages and reimbursements paid through payroll.
- Remove card and payment-app payments for every vendor.
- Remove payees whose W-9 shows a corporation, except attorneys and medical providers.
- Compare each remaining total to its box threshold, not a single number.
- Split mixed invoices into rent, services and proceeds before totaling.
What remains is the 1099 list, with each payee assigned to one form and one box.