1099-K vs 1099-NEC: which form fits your payouts
If your business pays independent contractors, creators, or sellers in the US, tax reporting comes down to two main forms. Which one applies depends on what the payment is for and how it flows.
1099-NEC is for services
When a business pays a person or unincorporated business for work, that is nonemployee compensation, reported on Form 1099-NEC. Paying a freelance videographer, a session musician, or a consultant falls here.
1099-K is for payment platforms
When a platform settles payments between buyers and sellers, like a marketplace processing card payments for merchants, the platform reports those settled transactions on Form 1099-K.
The distinction in one question
Are you paying someone for their services, or are you processing payments that other people are making to them? Paying for services points to 1099-NEC. Settling third-party transactions points to 1099-K.
Same recipient, different relationship
Taylor is a photographer.
Scenario A: Taylor works for the company. A company hires Taylor to photograph an event and pays $5,000. That is a service relationship between the company and a nonemployee, so Form 1099-NEC may be the relevant information return.
Scenario B: Taylor sells through a marketplace. Customers buy Taylor’s photography packages through a qualifying marketplace, and the platform settles those customer transactions to Taylor. That can implicate the Form 1099-K framework.
The money reaches the same person. The relationship behind the payment is different. Being a marketplace does not turn every outgoing payment into a 1099-K transaction either: a marketplace might settle seller proceeds and separately hire a freelance designer, and those payments are analyzed by what they are for.
Thresholds move, so check current rules
Reporting thresholds for both forms have changed several times in recent years and may change again. Confirm the current-year thresholds on IRS.gov or with a tax professional rather than relying on what was true last year.
Get the W-9 first
Whichever form applies, you need the recipient’s taxpayer information, collected on Form W-9, ideally at onboarding. Collecting W-9s in January for payments made last year is a painful annual tradition you can simply skip by collecting them up front. DiscoFi captures recipient tax details before the first payout goes out; the payout flow itself is documented in the API reference.
This guide is general information, not tax advice. Talk to a tax professional about your specific situation.
See tax info collected at onboarding. We’ll show where recipient details are captured before the first payout goes out.
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