Although these forms are called information returns, they serve different functions.

Employers use Form W-2, Wage and Tax Statement to:

• Report wages, tips, or other compensation paid to an employee.
• Report the employee's income, Social Security, and Medicare taxes withheld and other information.

Employers furnish the Form W-2 to the employee and the Social Security Administration (SSA). The SSA shares the information with the Internal Revenue Service.

Payers use Form 1099-MISC, Miscellaneous Information and/or Form 1099-NEC, Nonemployee Compensation to:

• Report any amount of federal income tax withheld under the backup withholding rules (Form 1099-MISC or Form 1099-NEC).
• Report payments of $10 or more made in the course of a business in royalties or broker payments in lieu of dividends or tax-exempt interest (Form 1099-MISC).
• Report payments of $600 or more made in the course of a business in rents, prizes and awards, other income and for other specified purposes, including gross proceeds paid to an attorney (Form 1099-MISC).
• Report payments of at least $600 in the course of a business to a person who's not an employee for services, including payments to an attorney (Form 1099-NEC).
• Report sales totaling $5,000 or more of consumer products to a person on a buy-sell, a deposit-commission, or other commission basis for resale (Form 1099-MISC or Form 1099-NEC).

Payers file Forms 1099-MISC and 1099-NEC with the IRS and provide them to the person or business that received the payment.