January 18, 2025

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1099-K VS. 1099-NEC: What’s the Difference for 2025?

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Introduction

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Do you receive payments from third-party settlement organizations (TPSOs) like PayPal, Venmo, and Zelle? If so, you’re likely familiar with Form 1099-K. In 2012, the IRS lowered the reporting threshold from $20,000 to $600, which meant more people received this form.

However, Form 1099-NEC is another closely related form that you should be aware of. This form is used to report nonemployee compensation, and it has also undergone some changes in recent years.

This comprehensive guide will provide an overview of 1099-K and 1099-NEC forms, including what they are, who needs to file them, and how they differ. We’ll also provide tips on how to avoid common mistakes when filing your taxes and additional resources for freelancers and gig workers.

what is 1099 k form

What is Form 1099-K?

Form 1099-K is a tax form that TPSOs are required to send to individuals who receive payments for goods or services. This form reports the gross amount of payments received through the TSPO during the tax year.

1099-K VS. 1099-NEC: What's the Difference for 2025?

Who Needs to File Form 1099-K?

TPSOs are required to send Form 1099-K to individuals who meet all of the following criteria:

  • Received payments for goods or services through the TSPO
  • Received more than $600 in payments from the TSPO during the tax year
  • Payments are made in the course of the TSPO’s trade or business

What is Form 1099-NEC?

Form 1099-NEC is a tax form that is used to report nonemployee compensation. This form is used by businesses to report payments made to independent contractors and other nonemployees.

Who Needs to File Form 1099-NEC?

Businesses are required to file Form 1099-NEC to individuals who meet all of the following criteria:

Introduction

  • Performed services for the business as an independent contractor or other nonemployee
  • Received payments of $600 or more from the business during the tax year
  • Payments are made in the course of the business’s trade or business

Key Differences Between Form 1099-K and Form 1099-NEC

The main difference between Form 1099-K and Form 1099-NEC is the type of income being reported. Form 1099-K reports gross income from payments received through a TSPO, while Form 1099-NEC reports nonemployee compensation.

Another key difference is who is required to file each form. TPSOs are required to file Form 1099-K, while businesses are required to file Form 1099-NEC.

How to Avoid Common Mistakes When Filing Your Taxes

Here are some tips on how to avoid common mistakes when filing your taxes:

  • Make sure you have all of the necessary forms. This includes Form 1099-K, Form 1099-NEC, and any other income statements.
  • Double-check the information on your forms before filing. Make sure the amounts reported are correct and that all of the information is accurate.
  • File your taxes on time. The deadline for filing your taxes is April 15th. If you file late, you may be subject to penalties and interest.

Additional Resources for Freelancers and Gig Workers

Here are some additional resources that can be helpful for freelancers and gig workers:

  • IRS Publication 525, Taxable and Nontaxable Income
  • IRS Publication 17, Your Federal Income Tax
  • Small Business Administration
  • Freelancers Union
  • National Association for the Self-Employed

Why 1099-K and 1099-NEC Forms Matter

1099-K and 1099-NEC forms are important because they help the IRS track income and ensure that you are paying the correct amount of taxes. These forms also help you to prove your income if you are applying for loans or other financial assistance.

How to Step-by-Step file 1099-K and 1099-NEC Form

1. Gather your documents. You will need the following documents to file your 1099-K and 1099-NEC forms:

  • Form 1099-K and 1099-NEC
  • Social Security number or Individual Taxpayer Identification Number (ITIN)
  • Form W-2 (if you also received income from an employer)
  • Other income statements

2. Complete the forms. Fill out the forms completely and accurately. Make sure to include all of the required information, such as your name, address, and Social Security number or ITIN.

3. Mail the forms to the IRS. You can mail the forms to the following address:

  • Internal Revenue Service
  • Cincinnati, OH 45999

The Benefits of Filing 1099-K and 1099-NEC Forms

There are several benefits to filing 1099-K and 1099-NEC forms, including:

  • Ensuring that you are paying the correct amount of taxes.
  • Proving your income if you are applying for loans or other financial assistance.
  • Avoiding penalties and interest for late filing.

Conclusion

1099-K and 1099-NEC forms are important tax documents that you should be aware of if you receive payments from TPSOs or businesses. By understanding the differences between these two forms and filing them correctly, you can ensure that you are paying the correct amount of taxes and avoid penalties.

Table 1: Comparison of Form 1099-K and Form 1099-NEC

Feature Form 1099-K Form 1099-NEC
Type of income reported Gross income from payments received through a TSPO Nonemployee compensation
Who is required to file TPSOs Businesses
Reporting threshold $600 $600
Deadline for filing April 15th April 15th

Table 2: Common Mistakes to Avoid When Filing Your Taxes

Mistake How to Avoid
Not having all of the necessary forms Make sure you have all of the necessary forms, including Form 1099-K, Form 1099-NEC, and any other income statements.
Double-checking the information on your forms before filing Make sure the amounts reported are correct and that all of the information is accurate.
Filing your taxes late The deadline for filing your taxes is April 15th. If you file late, you may be subject to penalties and interest.

Table 3: Additional Resources for Freelancers and Gig Workers

Resource Description
IRS Publication 525, Taxable and Nontaxable Income This publication provides information on what income is taxable and what income is not.
IRS Publication 17, Your Federal Income Tax This publication provides general information on federal income taxes.
Small Business Administration The SBA provides resources and support to small businesses, including freelancers and gig workers.
Freelancers Union The Freelancers Union is a national organization that represents the interests of freelancers and gig workers.
National Association for the Self-Employed The National Association for the Self-Employed is a trade association that represents the interests of self-employed individuals.

Table 4: Benefits of Filing 1099-K and 1099-NEC Forms

Benefit Description
Ensuring that you are paying the correct amount of taxes Filing 1099-K and 1099-NEC forms helps to ensure that you are paying the correct amount of taxes.
Proving your income if you are applying for loans or other financial assistance 1099-K and 1099-NEC forms can be used to prove your income if you are applying for loans or other financial assistance.
Avoiding penalties and interest for late filing Filing your 1099-K and 1099-NEC forms on time can help you avoid penalties and interest.

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