Yes. Contractors do get a 1099-NEC when a business pays them $600 or more for services during a calendar year. The business files a copy with the IRS and sends a copy to the contractor by January 31, and the contractor uses that form to report the income on their own return. A handful of exceptions change that answer, and they matter as much as the rule itself.
When You Have to Send a 1099-NEC
The obligation is triggered by three things together: the payment is for services, it was made in the course of your trade or business, and the total paid to that contractor across the year reaches $600.1Internal Revenue Service. Reporting Payments to Independent Contractors Personal payments don’t count, so hiring someone to paint your house is not reportable. Professional fees, commissions, and other nonemployee compensation paid to individuals, partnerships, and estates do count.2eCFR. 26 CFR 1.6041-1
The threshold is cumulative, not per invoice. A freelance designer paid $200 in March, $250 in July, and $200 in November has crossed $600, and the business needs to file.
When You Don’t Have to Send One
Several common situations remove the reporting duty even when a contractor was paid well over $600.
Payments to Corporations
Payments to C-corporations and S-corporations generally don’t require a 1099-NEC.1Internal Revenue Service. Reporting Payments to Independent Contractors Two exceptions override that rule: attorney fees and medical or health care payments are reportable regardless of the payee’s corporate form. Pay a law firm organized as an S-corp $5,000 for legal work and you still file.3Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
Payments by Credit Card or Payment App
When you pay a contractor by credit card, debit card, or a third-party network like PayPal or Venmo, the processor handles reporting on Form 1099-K. You do not also file a 1099-NEC for those payments; doing so would double-report the income.4Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC The 1099-K threshold was restored to $20,000 and 200 transactions under the One, Big, Beautiful Bill, retroactively reversing the lower American Rescue Plan threshold.5Internal Revenue Service. IRS Issues FAQs on Form 1099-K Threshold A contractor paid exclusively by card may end up with neither form if their total falls below that limit.
Payments to Foreign Contractors
Non-U.S. contractors don’t receive a 1099-NEC. You collect Form W-8BEN from individuals or W-8BEN-E from entities to document foreign status. Payments to foreign contractors for services are generally subject to 30% withholding, which a tax treaty with the contractor’s home country may reduce or eliminate.6Internal Revenue Service. Instructions for Form W-8BEN-E Without a valid W-8BEN on file, you withhold at the full 30% rate.
Is the Worker Really a Contractor?
The 1099-NEC only applies to independent contractors. An employee gets a W-2, and misclassifying an employee as a contractor exposes the business to back taxes, penalties, and interest on unpaid employment taxes. The IRS weighs three categories:7Internal Revenue Service. Employee (Common-Law Employee)
- Behavioral control. The more the business dictates how the work is done, what tools to use, and what hours to work, the more the worker looks like an employee.
- Financial control. Contractors typically invest in their own equipment, advertise their services to others, and have real opportunity for profit or loss.
- Relationship type. Written contract, benefits, and an indefinite arrangement all point toward employment.
No single factor decides it. When the answer is genuinely unclear, a business can file Form SS-8 to request an IRS determination, though that process can take months.
Getting a W-9 Before You Pay
You need the contractor’s taxpayer identification number to file a 1099-NEC, and you collect it on Form W-9. The contractor provides their legal name, business name if applicable, address, and either a Social Security Number or an Employer Identification Number.8Internal Revenue Service. About Form W-9 Collect it before the first payment goes out. Tracking down a former contractor in January is the version of this task most businesses learn to avoid the hard way.
If a contractor refuses to provide a W-9 or gives an incorrect TIN, you must withhold 24% of each payment and remit it to the IRS as backup withholding.9Internal Revenue Service. Backup Withholding A free IRS TIN Matching tool lets you verify name-and-TIN combinations before filing, which catches typos that would otherwise generate notices.10Internal Revenue Service. TIN Matching Tools
Deadline and How to File
The deadline for both filing 1099-NEC forms with the IRS and delivering copies to contractors is January 31. There is no automatic extension. If you need more time, you must submit Form 8809 on paper by January 31, explain why, and sign it, and only one 30-day extension is possible for the 1099-NEC.11Internal Revenue Service. Form 8809
Businesses filing 10 or more information returns of any type in a year must file electronically. The count combines all information returns, so four 1098s plus six 1099-NECs crosses the threshold.12Internal Revenue Service. General Instructions for Certain Information Returns Businesses filing fewer than 10 can still submit paper.
Penalties for Missing the Filing
The IRS charges separate penalties for failing to file with the agency and for failing to furnish the contractor’s copy, so one skipped form can produce two penalties. For returns due in 2026:13Internal Revenue Service. Information Return Penalties
- Up to 30 days late: $60 per form.
- 31 days late through August 1: $130 per form.
- After August 1 or never filed: $340 per form.
- Intentional disregard: $680 per form with no maximum cap.
A business that misses January 31 for 20 contractors and doesn’t file until September owes $340 per form to the IRS plus $340 per contractor statement, or $13,600 in total. Small businesses with gross receipts of $5 million or less get lower maximum caps, but the per-form amounts are the same.
What the Contractor Does With It
If you’re the contractor receiving the 1099-NEC, the amount in box 1 is income the IRS already knows about. It goes on Schedule C of your personal return, and you owe regular income tax plus self-employment tax on your net earnings after business expenses.
Self-employment tax is 15.3%: 12.4% for Social Security and 2.9% for Medicare.14Internal Revenue Service. Self-Employment Tax That’s effectively double what employees pay, because employees split these taxes with their employer while contractors cover both halves. Social Security applies only to net earnings up to $184,500 in 2026.15Social Security Administration. Contribution and Benefit Base Medicare has no cap. You can deduct half of your self-employment tax when calculating adjusted gross income, which reduces your income tax without reducing the SE tax itself.16Internal Revenue Service. Topic No. 554, Self-Employment Tax
Quarterly Estimated Taxes
Because nobody is withholding tax from your contractor pay, the IRS expects quarterly estimated payments if you expect to owe $1,000 or more at filing.17Internal Revenue Service. Estimated Taxes Tax year 2026 due dates:
- First quarter: April 15, 2026.
- Second quarter: June 15, 2026.
- Third quarter: September 15, 2026.
- Fourth quarter: January 15, 2027.
Missing these dates triggers an underpayment penalty that accumulates daily, even if you pay everything with your annual return. New contractors often get caught here because the April 15 payment covers only January through March, not the previous full year.
One boundary worth stating plainly: if the person paying you treats you as a contractor but controls your hours, tools, and process the way an employer would, receiving a 1099-NEC doesn’t make the classification correct. It’s the working relationship, not the form, that determines whether you should have gotten a W-2 instead.