Do I Have to File a 1099? Thresholds, Deadlines, and Penalties

If your business paid an individual or unincorporated entity $600 or more during the calendar year for services, rent, or certain other non-employee payments, you generally have to file a Form 1099 reporting that payment to the IRS. The rule applies only to payments made in the course of a trade or business, not to personal spending, and the specific form and deadline depend on what you paid for.¹

Which Payments Require a 1099

The line the IRS draws first is business versus personal. Paying someone to mow your home lawn triggers nothing. Paying that same person to maintain the landscaping at your office does.¹

Once you are inside a trade or business, two forms handle most reportable payments:

Form 1099-NEC (Nonemployee Compensation) covers what you paid to people who are not your employees for their services: contractors, freelancers, consultants, outside sales agents, and similar workers. If parts or materials were incidental to the service — an auto shop billing labor plus a replacement part — report the whole amount.²³
Form 1099-MISC (Miscellaneous Information) covers rent for office space, prizes and awards not tied to services, medical and health care payments, crop insurance proceeds, and a handful of other categories.⁴

Attorney fees deserve their own note. Payments to an attorney for legal services must be reported on 1099-NEC even if the law firm is a corporation, because the usual corporate exemption does not apply to legal services.¹ Gross proceeds paid to an attorney, such as settlement funds routed through a lawyer, go in Box 10 of Form 1099-MISC rather than on the NEC.⁵

The Dollar Thresholds

For most 1099-NEC and 1099-MISC categories, the threshold is $600 to a single payee across the whole calendar year.⁶ It is cumulative. Three separate payments of $200, $150, and $250 to the same contractor add up to $600 and trigger a filing, even though no single check would have.

Two other thresholds sit apart from the $600 default:

Royalties, such as payments for the use of intellectual property or mineral rights, are reportable on 1099-MISC starting at just $10.⁴
Direct sales of $5,000 or more of consumer products to a buyer for resale outside a permanent retail establishment must be reported on Form 1099-MISC or 1099-NEC.⁴

When You Don’t Have to File

Several common payments fall outside the reporting rules.

Payments to Corporations

You generally do not file a 1099 for payments to C-corporations or S-corporations, including LLCs that have elected to be taxed as either. The exceptions are the ones already flagged: legal services, medical and health care payments, and certain other narrow categories where the corporate exemption does not apply.⁵ The only reliable way to know a payee’s tax classification is to collect a Form W-9 before you cut the first check.⁷

Payments for Goods, Freight, Storage, or Phone

Payments solely for merchandise, freight, storage, or telephone service are excluded from 1099-NEC and 1099-MISC reporting.³ The rules target payments for services. When a vendor supplies both goods and services and the goods were incidental, though, the full payment is reportable.

Payments by Credit Card, Debit Card, or Payment App

If you paid a contractor through a credit card, debit card, or a third-party payment platform, do not issue a 1099-NEC for that portion. The payment processor reports those transactions to the IRS on Form 1099-K, and issuing your own 1099 would double-count the income.³ This is one of the more commonly missed exclusions, and it matters most for businesses that pay contractors through platforms rather than by check or ACH.

Get the Worker Classification Right First

Deciding between a 1099-NEC and a W-2 hinges on whether the person is an independent contractor or an employee. The IRS weighs three categories of evidence:⁸

Behavioral control — how much your business directs what the worker does and how they do it.
Financial control — who supplies the tools, who reimburses expenses, and how the worker is paid.
Type of relationship — whether there is a written contract, whether you provide employee benefits like insurance or paid vacation, and whether the work is a core part of your regular business.

Treating someone as a contractor when they should have been on payroll can produce significant IRS penalties for unpaid payroll taxes and withholding. If a specific worker is a close call, you can file Form SS-8 and ask the IRS for a formal determination.

Deadlines

The due date depends on which form you file and how you send it. The same January 31 deadline applies to the copy you must furnish to each payee.³

Form 1099-NEC: due January 31, paper or electronic. No automatic extensions.
Form 1099-MISC on paper: due February 28.
Form 1099-MISC electronically: due March 31.

When a deadline falls on a weekend or legal holiday, it moves to the next business day.

Paper vs. Electronic

Paper filers send Copy A of each 1099 to the IRS along with Form 1096, a transmittal summary. Use a separate 1096 for each type of 1099, and make sure the form is the correct tax-year version — the IRS rejects prior-year forms.⁶

If you file 10 or more information returns of any type in a calendar year, counting W-2s and every flavor of 1099 together, you must file electronically.⁹ The IRS offers two systems: the free web-based IRIS Taxpayer Portal and the FIRE system, which requires compatible software.¹⁰ Both require you to apply for a Transmitter Control Code before the first submission, so build in lead time.

Penalties for Missing or Wrong Filings

The IRS charges a penalty for each 1099 you fail to file correctly and on time, plus a separate penalty for each payee statement you fail to deliver on time. For returns due in 2026, the per-form amount climbs the longer you wait:¹¹

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 annual maximum.

Because the charges are per form, missing 50 returns can produce five-figure exposure quickly. Small businesses with average annual gross receipts of $5 million or less get lower annual maximum caps, though the per-form rates are the same.¹¹

Penalties can be waived or reduced for reasonable cause, meaning you exercised ordinary business care and still could not comply. The IRS looks at your compliance history, the reason for the failure, and how quickly you fixed it. If you receive Notice 972CG proposing penalties, you have 45 days to respond before the amount is assessed.

Federal is only one layer. Many states require separate filing of 1099 information with the state revenue department, with their own penalties for noncompliance. Check your state’s rules before you assume federal filing is the whole job.

1
Internal Revenue Service. Am I Required to File a Form 1099 or Other Information Return?
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Internal Revenue Service. Reporting Payments to Independent Contractors
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Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
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Internal Revenue Service. About Form 1099-MISC, Miscellaneous Information
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Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (Rev. April 2025)
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Internal Revenue Service. General Instructions for Certain Information Returns (2025)
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Internal Revenue Service. Instructions for the Requester of Form W-9
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Internal Revenue Service. Independent Contractor (Self-Employed) or Employee?
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Internal Revenue Service. E-File Information Returns
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Internal Revenue Service. E-File Information Returns with IRIS
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Internal Revenue Service. Information Return Penalties