1099-MISC vs.1099-NEC: Understanding Tax Form Differences and Deadlines

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1099-MISC vs.1099-NEC: Understanding Tax Form Differences and Deadlines

As businesses are scaling down and resizing following the COVID-19 pandemic, the gig economy is exploding as many of us turn to freelance work and independent contracting. In a gig economy, temporary and flexible jobs are commonplace. To reduce and streamline expenses and mitigate time and resource waste, businesses hire more independent contractors and freelancers instead of full-time employees.

The gig economy is well-suited to people with niche skills in key, in-demand fields such as marketing and tech-based work. It's also ideal for people who need more flexibility in their lives and want to work when they have the time, which is common for app-based delivery driving and similar jobs. People who may have been laid off are also opting to pursue alternative ways to put their skills to use and make ends meet instead of looking for full-time employment roles similar to those they had before. That means more people are ultimately turning to running their own businesses or working as independent contractors.

This kind of work can streamline some aspects of life, but it can also create unfamiliar (and sometimes complicated) financial situations. Come tax season, people who are new to self-employment and side gigs may find themselves confused by the seemingly ambiguous numbers and letter sequences that appear on the new tax forms they're receiving — and haven't seen before. Plus, sometimes forms, requirements and processes change, and it’s important to stay on top of these shifts to avoid substantial penalties. 

One of the financial forms an independent contractor is likely to encounter during tax season is form 1099-NEC. It's different from the 1099-MISC, which experienced gig workers may already be familiar with. To better understand the changes in what you may need to file, learn more about the new form 1099-NEC.