1099 vs. W-2: what’s the difference
A W-2 reflects pay from a traditional employer who has withheld income tax, Social Security, and Medicare from your paychecks throughout the year. A 1099 reflects income you’ve earned from clients as an independent contractor, investment accounts, or other sources. Often, no taxes have been withheld by the issuer of the 1099. However, it should be noted that a 24% backup withholding is generally applied for payees who don’t provide a Taxpayer ID (SSN) to the payor.
The most common types of 1099 forms
| Type | What it reports |
|---|---|
| 1099-NEC | Nonemployee compensation for freelance or contract work |
| 1099-MISC | Rent, royalties, prizes, and other miscellaneous income |
| 1099-K | Payments processed through apps and online marketplaces |
| 1099-INT | Interest income from banks and financial institutions |
| 1099-DIV | Dividends and other distributions |
| 1099-G | Government payments like unemployment or a state tax refund |
1099 General Reporting threshold changes resulting from the One Big Beautiful Bill Act (check for exceptions)
| Type | Threshold for the 2025 tax year | Threshold for the 2026 tax year |
|---|---|---|
| 1099-NEC | $600 | $2,000 |
| 1099-MISC | $600 | $2,000 |
| 1099-K | $20,000 and 200 transactions | $20,000 and 200 transactions |
| 1099-INT | $10 | $10 (for most interest payments) |
| 1099-DIV | $10 ($600 for liquidations) | $10 ($600 for liquidations) |
| 1099-G | $10 (for refunds and unemployment) | $10 (for refunds and unemployment) |
Note: Thresholds are often adjusted for annual inflation.
You owe tax on this income even if you don’t receive a Form 1099
The reporting threshold only determines whether a payer must send you a form—it doesn’t determine what’s taxable.
For example, if you earned $400 from a client who never sent a 1099 because you were under the threshold, you still have to report and pay tax on that $400.
What to do when you receive a 1099
- Check the amounts against your own records.
- Contact the issuer if something looks wrong.
- Report the income on the appropriate schedule as part of your 1040 filing.
