What are IRS 1099-MISC, 1099-NEC, and 1099-K Forms

Internal Revenue Service (IRS) 1099-forms

1. Form 1099-MISC (Miscellaneous Information)

Form 1099-MISC is an Internal Revenue Service (IRS) form used by businesses to report certain types of miscellaneous incomes. If a business paid more than $600 in legal settlements, rent payments, or prizes and awards, it will need to file form 1099-MISC, because these are all payments that are not subject to self-employment taxes.  The due date for IRS form 1099-MISC is Feb 28, if you file by mail (on paper), and March 31 if you file electronically.

2. Form 1099-NEC (Non-Employee Compensation)

Form 1099-NEC (Non-Employee Compensation) is the IRS form used by businesses to report payments made to independent contractors, freelancers, sole proprietors, and self-employed individuals. Before year 2020, all non-employee compensation was reported on Form 1099-MISC. Form 1099-NEC is due on Jan-31st  of the following tax year.

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

Form 1099-K is a report of payments you got during the year from:

• Credit, debit, or stored value cards such as gift cards (Payment cards)

• Payment apps or online marketplaces (Third-party payment networks).

Starting from January 1, 2023, the IRS has introduced new rules for reporting payments received for goods and services. These changes have reduced the reporting threshold to $600 USD for the 2023 tax season, compared to the previous threshold of $20,000 USD and 200 transactions in 2022.

When the total payment amount exceeds $600, third-party payment networks are obligated to file Form 1099-K with the IRS and provide you with a copy. However, it's important to note that Form 1099-K should not include gifts or reimbursements for personal expenses received from friends and family.

You can use Form 1099-K along with your other tax records to accurately calculate and report your taxable income when filing your taxes. Payment card companies, payment apps, and online marketplaces are also required to submit Form 1099-K to the IRS and send a copy to taxpayers by January 31st.

You should get Form 1099-K for these situations:

Gifts or reimbursement of personal expenses from friends and family should not be reported on Form 1099-K. They are not payments for goods or services. Payment apps and online marketplaces are required to file a Form 1099-K if the gross payments to you for goods and services are over $600. The $600 reporting threshold started with tax year 2023. There are no changes to what counts as income or how tax is calculated.

How does Form 1099-K threshold change impact Docyt Customers? 
Docyt leverages a partnership with a third party payment network Dwolla for all Docyt ACH Payments. Dwolla issues 1099-K forms for transactions within our network that exceeds federal or state reporting thresholds. 

What about other payment types like Docyt Check and Self Print Check Transactions?

All Transactions using Docyt ACH, Docyt Self Print Check, or Docyt Check are captured on the 1099 report available in Docyt.  View this article to learn how to create a 1099 report in Docyt.

What do I do if I or my end users received a Form 1099-K?

The Form 1099-K is an information return for both federal and state taxes. It's important to note that the gross payments reported on the Form 1099-K may not always represent your reportable income. To accurately determine your taxable income, you should use the form in conjunction with other tax records such as bank statements and invoices. It's recommended to consult with your tax advisor for assistance in determining your taxable income.

 4. General information of 1099s i.e. what to report, amounts to report, due date (to IRS), and due date (to recipient) are as shown in Table-I.