In most cases, you do not issue a 1099 to a C corporation. Federal regulations exempt corporations from the information-return system that applies to sole proprietors, partnerships, and individuals. But the exemption has real exceptions — attorney fees and medical payments are the big ones — and starting with the 2026 tax year the general reporting threshold rises from $600 to $2,000, which changes when the question even comes up.
The General Rule and Why It Exists
Treasury Regulation Section 1.6041-3(p)(1) exempts payments made to corporations from the information-return requirements that normally apply under Section 6041.1GovInfo. 26 CFR 1.6041-3 – Exceptions to Return of Information The reasoning is that C corporations already file their own corporate returns and face separate reporting obligations, so the IRS treats those built-in controls as a substitute for third-party 1099 reporting.
In practice, if you hire a C corporation for consulting, software development, marketing, or any other ordinary business service, you do not file a 1099-NEC or 1099-MISC for those payments. The exemption saves a significant amount of paperwork for companies that deal heavily with corporate vendors.
Which Entities Count as Corporations
The exemption is not limited to traditional C corporations. S corporations get the same treatment, and so does any LLC that has elected to be taxed as a C or S corporation by filing Form 8832 or Form 2553.2Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC If a vendor’s W-9 shows “LLC” with a “C” or “S” entered in the classification space, that vendor qualifies for the exemption the same way a traditional corporation would.
An LLC that has not elected corporate treatment is taxed as either a sole proprietorship or a partnership, and payments to those entities do require a 1099. The only reliable way to tell the difference is the W-9.
When You Must Send a 1099 to a Corporation Anyway
The regulation that exempts corporations carves out specific payment types where the IRS wants visibility no matter how the recipient is organized. These are the ones that trip businesses up, because they apply even when the vendor is clearly a corporation on paper.
Payments to Attorneys
Every payment to a lawyer or law firm in connection with legal services must be reported, whether the firm is a solo practitioner, an LLP, or a professional corporation. Fees for legal services go on Form 1099-NEC, Box 1. Gross proceeds paid to an attorney that are not fees for the attorney’s own services, such as settlement funds, go on Form 1099-MISC, Box 10.2Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC The statutory basis is 26 U.S.C. § 6045(f), which applies to any payment to an attorney in connection with legal services, whether or not those services were performed for the payor.3Office of the Law Revision Counsel. 26 U.S.C. 6045 – Returns of Brokers
This is the exception that catches businesses most often. A company pays a law firm structured as a professional corporation, assumes the corporate exemption applies, and skips the 1099. It shouldn’t.
Medical and Health Care Payments
Payments to physicians, hospitals, and other health care providers go on Form 1099-MISC, Box 6, even when the provider is incorporated. The IRS instructions state plainly that the corporate exemption does not apply to medical or health care payments, including payments to professional corporations.4Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC This covers direct payments for services and payments made by insurers under health, accident, and sickness insurance programs. Payments to tax-exempt hospitals or government-operated medical facilities are not reportable.1GovInfo. 26 CFR 1.6041-3 – Exceptions to Return of Information
Fish Purchases and Substitute Payments
Two narrower exceptions round out the list. Cash payments for fish purchased from anyone in the business of catching fish must be reported on Form 1099-MISC, Box 11, regardless of corporate status. Substitute payments in lieu of dividends or tax-exempt interest, made by a broker to a customer whose securities have been lent out, must be reported in Box 8, and for this purpose “customer” explicitly includes corporations.2Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
The $2,000 Threshold Starting in 2026
For tax years beginning after 2025, the minimum payment that triggers a 1099 filing obligation rose from $600 to $2,000. This applies to Form 1099-NEC and to most categories on Form 1099-MISC, including medical and health care payments and gross proceeds paid to attorneys.5Internal Revenue Service. Publication 1099 General Instructions for Certain Information Returns – For Use in Preparing 2026 Returns Starting in 2027 the threshold will adjust annually for inflation.
A few categories still trigger at lower amounts. Royalties on Form 1099-MISC require reporting at $10. So the practical bottom line for the exceptions above: you only need to file a 1099 for a corporate attorney or medical provider if total payments to that vendor hit $2,000 or more during the calendar year.
Confirming Corporate Status With a W-9
The only reliable way to confirm a vendor qualifies for the corporate exemption is to collect a completed Form W-9 before you pay. The vendor checks a box on Line 3a for federal tax classification. A traditional corporation checks “C corporation.” An S corporation checks “S corporation.” An LLC that has elected corporate tax treatment checks “LLC” and enters “C” or “S” in the adjacent space.6Internal Revenue Service. Form W-9 (Rev. March 2024) Request for Taxpayer Identification Number and Certification
Keep every W-9 on file. If the IRS asks why you didn’t issue a 1099 for a particular vendor, a signed W-9 showing corporate classification is your documentation. Without it, you have no defense for skipping the filing.
If a vendor refuses to furnish a taxpayer identification number, you’re required to begin backup withholding at 24% on all reportable payments to that vendor and remit it to the IRS.7Internal Revenue Service. Instructions for the Requester of Form W-9 The withholding obligation falls on the payor, so ignoring it creates liability for your business, not the vendor’s.
Before filing, you can verify that a vendor’s name and TIN actually match IRS records through the free TIN Matching program.8Internal Revenue Service. Taxpayer Identification Number (TIN) Matching Tools Catching a mismatch before you file avoids penalty notices later.
What About Dividends and Interest
The corporate exemption reaches beyond service payments. Corporations are also generally exempt from receiving Form 1099-DIV for dividends and Form 1099-INT for interest.9Internal Revenue Service. Instructions for Form 1099-DIV10Internal Revenue Service. Instructions for Forms 1099-INT and 1099-OID The corporation still reports the income on its own corporate return; the IRS just doesn’t require the bank or brokerage to generate a separate information return. The substitute-payment carve-out mentioned above is the exception.
Deadlines and Penalties
For payments made during the 2026 calendar year, the deadlines are:
- Recipient copies of 1099-NEC and 1099-MISC: January 31, 2027.
- IRS filing on paper: February 28, 2027.
- IRS filing electronically: March 31, 2027.
Electronic filing is not optional for most businesses. Any company filing 10 or more information returns in a calendar year, counting all types including W-2s, must file electronically.11Internal Revenue Service. E-File Information Returns If a due date falls on a weekend or legal holiday, it shifts to the next business day.5Internal Revenue Service. Publication 1099 General Instructions for Certain Information Returns – For Use in Preparing 2026 Returns
Penalties for missing or incorrect returns due in 2026 scale with how long you take to fix them: $60 per return corrected within 30 days, $130 per return corrected by August 1, and $340 per return filed after August 1 or never filed. Intentional disregard carries a penalty of at least $680 per return with no annual cap.12Internal Revenue Service. Information Return Penalties13Office of the Law Revision Counsel. 26 USC 6721 – Failure to File Correct Information Returns
These penalties cut both ways. Failing to send a 1099 to a corporate law firm is a mistake, but so is filing unnecessary 1099s with incorrect information. Collect the W-9 early, keep it current, and let the vendor’s own classification drive the reporting decision.