1099 NEC vs 1099 INT: Key Differences, Who Gets Each, and Filing Steps
Learn how 1099-NEC and 1099-INT forms differ, who should receive each, and the correct filing process to ensure accurate tax reporting.
Tax season often brings a flurry of forms, and two that frequently cause confusion are the 1099-NEC and 1099-INT. Though related to taxes, these forms serve distinct purposes and apply to different types of income. Understanding which form applies to your situation helps ensure accurate reporting.
This article clarifies the differences between the 1099-NEC and 1099-INT, explains who typically receives each one, and outlines the steps for handling them correctly.
Who Receives 1099-NEC
Form 1099-NEC reports Nonemployee Compensation. Businesses use this Internal Revenue Service (IRS) form to report payments made to individuals who are not on their payroll but provide services. If you operate as an independent contractor, freelancer, gig worker, or sole proprietor, you might receive this form from clients.
A business generally must issue a Form 1099-NEC if it paid $600 or more during the calendar year to a nonemployee for services rendered in the course of its trade or business.1Internal Revenue Service. Reporting Payments to Independent Contractors This applies to payments made to individuals, partnerships, estates, and sometimes corporations (typically for attorney fees or certain healthcare payments). Personal payments are not reported on this form.
Therefore, service providers paid $600 or more by a single business client during the year should generally expect a Form 1099-NEC detailing this compensation. This income is typically considered self-employment income and must be reported on the recipient’s tax return.
Who Receives 1099-INT
Form 1099-INT reports interest income. Entities such as banks, credit unions, brokerage firms, and government bodies issue this form when they pay interest to individuals or other entities.
If you hold accounts or investments that earn interest, like savings accounts, money market accounts, certificates of deposit (CDs), or certain bonds, you will likely receive a 1099-INT if the interest earned meets the reporting threshold.
Payers must generally issue a Form 1099-INT if they paid $10 or more in interest during the year.2Internal Revenue Service. Instructions for Forms 1099-INT and 1099-OID This threshold primarily applies to taxable interest (reported in Box 1) and interest on U.S. Savings Bonds and Treasury obligations (Box 3). Even if you earn less than $10 from one payer and do not receive a form, the IRS requires you to report all interest income. A 1099-INT must also be issued regardless of the amount if federal income tax was withheld under backup withholding rules.
Key Differences in Reporting
The main difference between Form 1099-NEC and Form 1099-INT lies in the type of income reported, which affects how it’s handled on a tax return. Form 1099-NEC details earnings from services performed as a nonemployee, generally considered active business income. Form 1099-INT reports interest income, typically passive income from investments or accounts.
Income reported on Form 1099-NEC usually represents self-employment earnings. Recipients report this income, along with related business expenses, on Schedule C, Profit or Loss from Business (Sole Proprietorship), filed with their Form 1040.
The net profit calculated on Schedule C is generally subject to self-employment tax, covering Social Security and Medicare contributions for the self-employed.3Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) This tax is calculated using Schedule SE, Self-Employment Tax, and typically applies if net earnings from self-employment exceed $400.4Social Security Administration. If You Are Self-Employed
Interest income from Form 1099-INT follows a different path. Taxable interest is reported directly on Form 1040. If the total taxable interest from all sources exceeds $1,500, the recipient must also file Schedule B, Interest and Ordinary Dividends, listing each payer. This interest income is taxed at the individual’s ordinary income tax rate and is not subject to self-employment tax.
Form 1099-INT may also report tax-exempt interest (Box 8), such as from municipal bonds. While generally not taxed federally, this amount still needs to be reported on Form 1040 for informational purposes. Any federal income tax withheld (Box 4 of either form) is reported in the payments section of Form 1040.
Filing Steps for Each Form
Businesses issuing Forms 1099-NEC or 1099-INT must follow specific procedures. First, gather the recipient’s name, address, and Taxpayer Identification Number (TIN), often using Form W-9. After determining the total payments for the year meet the reporting thresholds ($600 for NEC, $10 for most INT), prepare the appropriate form.
Payers must furnish Copy B of Form 1099-NEC to recipients by January 31 of the following year. Copy B of Form 1099-INT must also be sent to recipients by January 31.
The deadlines for filing Copy A with the IRS differ. Form 1099-NEC must be filed with the IRS by January 31, whether electronically or on paper. For Form 1099-INT, the IRS filing deadline is February 28 for paper forms and March 31 for electronic filing.
Payers filing paper forms must send Copy A with a summary Form 1096 to the IRS.5Internal Revenue Service. Form 1096, Annual Summary and Transmittal of U.S. Information Returns However, electronic filing is mandatory for those submitting 10 or more information returns (including 1099s, W-2s, etc.) in aggregate. E-filing can be done through systems like the IRS’s Information Returns Intake System (IRIS) portal, which eliminates the need for Form 1096.
Recipients should verify the information on any 1099 form received. If errors are found, contact the payer for a corrected form. Report income from Form 1099-NEC (Box 1) on Schedule C.
Report taxable interest from Form 1099-INT (Box 1) on Form 1040, using Schedule B if total interest exceeds $1,500. Report tax-exempt interest (Box 8) on Form 1040 as required. Recipients do not need to attach the 1099 forms to their tax return but must accurately report the income.
Common Mistakes to Avoid
Several common errors can occur when dealing with Forms 1099-NEC and 1099-INT. Using the wrong form for the payment type (e.g., reporting interest on a 1099-NEC) is a frequent mistake. Ensure the payment type aligns with the correct form.
Accuracy in reporting recipient information, especially the Taxpayer Identification Number (TIN), is essential. Mismatches between the name and TIN provided and IRS records can trigger notices. Payers can use the IRS’s TIN Matching Program to verify this information beforehand. Failure to provide a correct TIN can lead to backup withholding, where the payer must withhold tax (currently 24%) from payments.6Internal Revenue Service. Topic No. 307, Backup Withholding
Payers must correctly implement backup withholding when required (e.g., missing or incorrect TIN, IRS notification) and report any withheld amounts accurately in Box 4 of the relevant form.
For businesses issuing Form 1099-NEC, misclassifying workers is a significant error. Treating someone who should be an employee as an independent contractor leads to issuing a 1099-NEC instead of a Form W-2, improperly shifting tax burdens and potentially denying worker protections. The IRS scrutinizes worker classification.
Accurate reporting of payment amounts is also necessary. Typographical errors or including payments from the wrong year can lead to incorrect income reporting. Double-check amounts before issuing forms.
Recipients commonly err by failing to report income shown on a received 1099 form. The IRS matches these forms to tax returns, and unreported income will likely generate an inquiry. Remember that all income must be reported, even if no 1099 form is received. If an expected form is missing, use your own records to report the income and consider contacting the payer.
Finally, businesses should not overlook state-level reporting requirements. Many states have separate rules for 1099 reporting, which may differ from federal guidelines regarding thresholds, deadlines, and filing methods, even if the state participates in the Combined Federal/State Filing Program. Compliance with specific state rules where obligations exist is necessary.