1099-K vs 1099-NEC: what’s the difference in 2026

The short answer

Who issues each form

Form 1099-NEC is filed by the business that bought the services: the payer. If your company hires a freelance videographer, a session musician, or a consultant and pays them directly, your company issues the form.

Form 1099-K is filed by the payment settlement entity in the middle: a marketplace, a payment app, or a card processor that settles funds to sellers. The platform, not the buyers, does the reporting, because the platform is the one that saw every transaction.

What each form reports

1099-NEC reports the total a business paid one person or unincorporated business for services during the year. It is a payer-to-payee number for work performed.

1099-K reports the gross amount of transactions the platform settled to a payee: before fees, refunds, and chargebacks. That gross figure is not income by itself. The recipient reconciles it on their return, subtracting refunds, platform fees, and expenses.

How the payment method affects which form applies

The rail the money travels on matters. When you pay a contractor directly, by check, wire, or ACH or an instant rail from your account to theirs, whether in-house or through payout infrastructure backed by a sponsor bank, you are the payer and 1099-NEC reporting is yours.

When the payment runs through a third-party settlement organization, such as a payment app’s goods-and-services flow or a marketplace checkout, the settlement entity takes over reporting on 1099-K. Payments made by payment card or through a third-party network are excluded from 1099-NEC precisely so the same dollars are not reported twice.

The 2026 thresholds

Both thresholds changed under the One Big Beautiful Bill Act. For payments made in calendar year 2026:

• 1099-NEC (and 1099-MISC): $2,000. A business that pays a nonemployee $2,000 or more for services during the year files the form. This replaced the long-standing $600 threshold, and the figure is indexed for inflation in later years.
• 1099-K: more than $20,000 and more than 200 transactions. The threshold reverted to the original two-part test. A platform files when a payee crosses both the dollar amount and the transaction count.

Two things to keep in mind. First, confirm current figures on IRS.gov before filing season; the NEC threshold will move with inflation indexing, and some states set their own lower 1099-K thresholds. Second, all income is taxable whether or not a form is issued. The thresholds decide who must file an information return, not what a recipient owes.

A marketplace example

Taylor is a photographer who sells photography packages through a marketplace. Customers pay the platform, and the platform settles the proceeds to Taylor. In 2026, Taylor sells 260 packages totaling $26,000 in gross transactions. That crosses both parts of the test, more than $20,000 and more than 200 transactions, so the marketplace issues Taylor a 1099-K for the gross amount. If Taylor had sold 150 packages for $22,000, only one part of the test would be met and no federal 1099-K would be required.

A contractor example

Now a production company hires Taylor directly to photograph an event and pays $5,000 by ACH. That is nonemployee compensation above the $2,000 threshold, so the company issues Taylor a 1099-NEC. Same person, same camera, different relationship: the company bought Taylor’s services rather than settling other people’s purchases. And if the company had paid that invoice by corporate card through a payment platform instead, the platform’s 1099-K reporting would take over.

Why payment context should be preserved

January reporting is mechanical when every payment already knows what it was for. Was this payout compensation for services, seller proceeds, a refund, or a prize? If that context is captured when the payment is made, form season is a query. If it lives in someone’s memory or a spreadsheet, it is an archaeology project. The same records that make payout reconciliation routine make 1099 season routine.

The other half is collecting the recipient’s taxpayer information, on Form W-9, at onboarding rather than chasing it in January. DiscoFi captures recipient tax details before the first payout goes out and records every payment in a double-entry ledger; the payout flow is documented in the API reference, and the scaled-up version of this problem is covered in our guide to 1099 compliance for mass payouts.

This guide is general information, not tax advice. Talk to a tax professional about your specific situation.