Episode 21: 2026 Form 1099-NEC and 1099-MISC Drafts: New Boxes, New Questions

The IRS dropped another round of draft 2026 forms on March 27th — updated versions of the 1099-NEC and 1099-MISC — and we still don't have a final version, which is notably late compared to prior years. Jason walks through what's changed in the latest drafts, including the new boxes for reporting tips and overtime pay, and a cosmetic redesign of the name and address fields that's probably not a big deal but worth keeping an eye on.

The bigger conversation this week is the why behind those new boxes: tips and overtime deductions are now available to workers on their personal returns, which means employers and payers need to break that information out on the forms they issue. For most listeners, that's a W-2 story — but Jason explains the narrow scenario where overtime or tips could legitimately land on a 1099, including the unusual situation where a worker is classified as an employee under the FLSA but treated as a contractor by the IRS.

Information Return Intelligence is sponsored by IOFM.

Transcript

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This week on Information Return Intelligence, we talk about draft versions, the latest drafts of 1099 NEC and 1099 Miscellaneous that the IRS released on March 27th. Information Return Intelligence is brought to you by IOFM. Check them out at IOFM.com. Welcome to this week's episode of Information Return Intelligence. I'm Jason Dinison. This is a fast-moving weekly podcast where we talk about all things related to 1099s and anything else in the information return world. On March 27th, the IRS released another round of drafts of the 2026 versions of 1099 NEC and 1099 Miscellaneous. I can't really, looking at the forms, I couldn't spot anything different from some of the prior versions that they've been putting out since November or December. They put out several rounds of draft versions, and they still haven't released a version in final form yet. And it's actually getting a little late for that. Usually, most years the 1099 is released in its final format by now, but not this year. And that's probably because there are some substantial changes to both the NEC and the miscellaneous, with new boxes being added. So those new boxes report overtime pay and tips. We talked about that in one of our early, early episodes, and a little bit later we'll talk about it again. What we mean, why are these boxes on the forms? But there's new boxes for reporting tips and overtime on 1099 NEC and miscellaneous. One other thing that I've noticed on these drafts, and I'm not 100% sure if it's a big deal or just a footnote, although I think it's probably just a footnote. The draft form breaks down the name and address fields for both the issuer, that's you, and the recipient. And in the past, it's always just been one box encompassing this information. And now each item has its own separate field. So in the 2025 version of the 1099 NEC or miscellaneous, there was a box for payers' name, that's your organization's name, the street address, the city, the state, and the zip code, and also your phone number, all in one box. And for the recipient, there were three boxes: one for their name, one for their street address, and then one box for city, state, and zip. The new draft version for 2026 breaks all of that down into separate fields. So name, street address, room or suite number, city, state, zip code, phone number, all of that has its own separate boxes on the form. This is likely just a cosmetic change and not anything that's actually a big deal. But I like to point these things out and just bring these things up as FYI sort of things. And of course, we'll keep watching that to see if that actually has some sort of bigger implication. I doubt it does, but that's just kind of an FYI. We'll take a break here and hear from our sponsor, IOFM, and then when we come back, we'll look at what do we mean by tips and overtime and why are these boxes on the 2026-1099. Information return intelligence is brought to you, as always, by IOFM, the Institute of Finance and Management. We're getting close to the spring conference in Orlando, May 11th through the 13th at the Lowe's Sapphire Falls Resort at Universal in Orlando. This is the most comprehensive event dedicated to accounts payable and procure-to-pay professionals that you can find. And if you're interested in this sort of thing, which you must be, if you're listening to this podcast, you should look at IOFM, become a member, and come to these conferences. I'll be there. I teach all of their 1099 courses, including an eight-hour certification workshop on the first day of the event. Head to IOFM.com to learn more. So let's talk about tips and overtime just a little bit more. I don't want to go too deep into it. Maybe we will in a future episode. I know we've touched on this in very early episodes of the show, but this stuff is hard. So we're going to talk about it again here, and maybe we'll talk about it again later, too. Tips and overtime. So this all relates to changes in tax law that now allow individuals who receive qualifying tips and overtime to take a deduction on their personal tax returns for those tips and overtime. And so the employer, when they issue information forms to the employee, has to break out qualifying tips and overtime to that worker so that the worker knows that they might be able to deduct that amount on their personal tax return. Tips and overtime, the vast majority of the time are going to be employee W-2 concepts. So why are these boxes on 1099 NEC and 1099 miscellaneous? Well, it's because once in a while you might encounter a situation where you'll be reporting tips or overtime on a 1099. Let's start with overtime first. So qualifying overtime for this deduction is overtime paid under Section 7 of the Fair Labor Standards Act. Now that's an employee concept, not a contractor concept. It is possible, not likely, but possible, that you could have a worker who's considered an employee by the Department of Labor. So you have to use the Fair Labor Standards Act with that worker. But they could be considered a contractor in the eyes of the IRS. So you're using FLSA when you pay that person because they're an employee with the Department of Labor, but you report it on a 1099 because they're considered a contractor by the IRS. I was going to say theoretically that could happen, but it's really not theoretical. It could happen and sometimes does happen. I think, though, for most of our listeners, that would be very, very rare to have that circumstance arise. But if it does arise, you might need to report overtime on a 1099. And then we have qualifying tips, which we're not going to get into what a qualifying tip is. Now, with tips, that could be something like that same situation where you've got an employee for the DOL, but a contractor in the eyes of the IRS, and they have tips that they receive from customers. That would be very rare. The more common thing would potentially be if you, your organization, pays a tip to your contractor. If you pay a tip to a contractor, you'll need to stop and evaluate this because there's some hoops that you have to jump through, including determining the industry code of your contractor. As you might imagine, that starts to get into pretty deep waters. So I think we better stop with that. The bottom line is overtime and tips usually will be a W-2 employee thing, but once in a while might be a 1099 thing. And so you just need to be aware of this. And if you ever have a contractor where you happen to be paying overtime or tips to them, you'll need to stop and evaluate things some more. That'll do it for this episode of Information Return Intelligence, sponsored by IOFM. Check them out at IOFM.com. I'm Jason Dynason, and we'll talk to you again next week. Dinason Media Ventures.