When Do You Have to 1099 Someone? Thresholds, Forms, and Deadlines

You have to send someone a 1099 when your business pays them $600 or more during the calendar year for services, they are not your employee, they are not a corporation (with two exceptions), and you paid them by check, cash, ACH, or wire rather than through a card or payment app. That is the short version of when you have to 1099 someone, and each piece of it changes the answer in ways worth understanding before January arrives.

The $600 Threshold and What Counts Toward It

The rule applies to cumulative payments across the year to a single payee, not to any one invoice.¹ Ten payments of $65 to the same contractor cross the threshold just as clearly as one payment of $650. Track the year-to-date total per vendor, not per check.

The obligation only attaches to payments made in the course of a trade or business. Hiring someone to paint your office triggers a 1099. Hiring the same painter for your home does not. Nonprofits and government agencies count as trades or businesses for this rule and file the same forms.

A few categories use different numbers. Royalties are reportable at just $10. For 2026 returns, rent payments and prizes not tied to services have been adjusted for inflation to a $2,000 threshold.² These inflation-adjusted amounts can shift year to year, so confirm the current figure before filing.

Buying physical goods or inventory from a vendor is not reportable. The rule targets payments for services, rent, royalties, and similar categories, not product purchases.

Who the Recipient Is Changes the Answer

The payee’s legal structure decides whether you owe them a form at all.

You generally must issue a 1099 to individuals, sole proprietors, partnerships, and estates. These are pass-through structures where income flows to personal returns, and the IRS uses 1099 filings to check that the income shows up there.

Payments to C-corporations and S-corporations are usually exempt.³ Two exceptions override the corporate exemption:

Attorney fees of $600 or more must be reported to any law firm or lawyer, even one that is incorporated. Gross proceeds paid to an attorney in connection with legal services, such as settlement funds, go on 1099-MISC Box 10.⁴
Medical and health care payments to corporations are reportable, though payments to tax-exempt hospitals are excluded.³

LLCs are the recipient type that trips people up. A single-member LLC or an LLC taxed as a partnership gets a 1099. An LLC that has elected to be taxed as a corporation falls under the corporate exemption. The company name will not tell you which is which, which is why you need a W-9 from every vendor before you pay them.

Is the Person Actually a Contractor?

If the person you are paying is really your employee, you report their pay on a W-2 instead, and payroll withholding rules apply. Misclassifying an employee as a contractor is one of the most expensive mistakes a small business can make, since it can trigger back taxes, penalties, and interest going back years.

The IRS looks at three categories of the working relationship: behavioral control (do you dictate how the work gets done, or just the result?), financial control (does the worker carry their own expenses, serve other clients, and risk profit or loss?), and the type of relationship (written contract, benefits, whether the work is a permanent part of your operation).⁵ No single factor is decisive; the IRS weighs the overall picture. A genuine contractor sets their own methods and schedule and typically serves multiple clients.

How You Paid Them Matters

If you paid the contractor through a credit card, debit card, or a third-party payment network like PayPal or Venmo for Business, you do not issue a 1099-NEC for that payment. The payment processor reports it on Form 1099-K.⁶ Reporting the same payment on both forms would double-count the income.

The current 1099-K threshold for third-party settlement organizations remains $20,000 in gross payments and more than 200 transactions. The IRS has repeatedly delayed a planned drop to $600, so the higher threshold still applies.⁷

In practice: payments by check, cash, ACH, or wire go on a 1099-NEC. Payments through a card network or payment app do not. Sort your payments by method before you start preparing forms.

1099-NEC or 1099-MISC

Once you know a payment is reportable, the type of payment tells you which form to use.

Form 1099-NEC covers nonemployee compensation of $600 or more. This is the form for fees paid to freelancers, consultants, subcontractors, professional service providers such as accountants, architects, and engineers, and commissions paid to nonemployee salespeople. Attorney fees for the lawyer’s own services also go here.⁴

Form 1099-MISC covers other business payments, with each category in its own box:⁴

Rent for office space, equipment, or pasture land (Box 1)
Royalties of $10 or more (Box 2)
Prizes and awards not paid for services (Box 3)
Medical and health care payments (Box 6)
Gross proceeds paid to attorneys, such as settlement funds (Box 10)

Get the W-9 Before You Pay

You cannot file a 1099 without the recipient’s taxpayer identification number, and Form W-9 is how you collect it. Request a completed W-9 from every new vendor before the first payment goes out, not in January when you are trying to file.⁸

The W-9 gives you the vendor’s legal name, business name, entity type, address, and TIN. Individuals typically provide a Social Security Number; entities provide an EIN; sole proprietors can use either. The entity type box tells you whether an LLC is taxed as a corporation, a partnership, or a disregarded entity, which is what determines whether you owe them a form at all.

A vendor who will not return a W-9 creates a real problem. If a contractor refuses to provide a TIN, provides an incorrect one, or the IRS notifies you of a mismatch, you are required to withhold 24% of every future payment and remit it to the IRS. This is backup withholding, and it continues until the contractor provides a valid TIN.⁹ You still file the 1099 and report the withheld amount in Box 4.

Foreign Contractors Are Not on a 1099

If your contractor is a foreign individual or foreign entity performing services, they do not get a 1099. Instead, you collect a Form W-8BEN from a foreign individual or a W-8BEN-E from a foreign entity, and you report payments on Form 1042-S.¹⁰ The default withholding rate on U.S.-source income paid to foreign persons is 30%, though a tax treaty may reduce it. Without a proper W-8 on file, you must withhold at the full 30%.

Deadlines

The two main forms have different due dates:⁴

Form 1099-NEC is due to both the IRS and the recipient by January 31, whether you file on paper or electronically.
Form 1099-MISC recipient copies are due January 31; IRS copies are due February 28 on paper or March 31 electronically.

You can request an automatic 30-day extension to file 1099-MISC with the IRS using Form 8809, submitted by the original due date, with no explanation required. Extensions for 1099-NEC are nonautomatic: you file Form 8809 on paper with a written explanation, and the IRS may deny it.¹¹ Either way, an extension only covers filing with the IRS. It does not extend your deadline to send copies to the contractor.

What It Costs to Miss

Penalties are assessed per form and scale with lateness. For 2026 information returns:¹²

Up to 30 days late: $60 per form
31 days late through August 1: $130 per form
After August 1 or not filed: $340 per form
Intentional disregard: $680 per form, with no annual cap

Fifty missed contractor forms corrected in September comes to $17,000 before anything else. The same schedule applies to forms filed with wrong information, such as an incorrect TIN or misspelled name. Small businesses with average annual gross receipts of $5 million or less get lower annual caps on total penalties, but the per-form amounts are the same.

1
eCFR. 26 CFR 1.6041-1 – Return of Information as to Payments of $600 or More
2
Internal Revenue Service. Publication 1099 General Instructions for Certain Information Returns – For Use in Preparing 2026 Returns
3
eCFR. 26 CFR 1.6041-3 – Payments for Which No Return of Information Is Required Under Section 6041
4
Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025)
5
Internal Revenue Service. Independent Contractor (Self-Employed) or Employee?
6
Internal Revenue Service. Form 1099-K FAQs: Third Party Filers of Form 1099-K
7
Internal Revenue Service. Understanding Your Form 1099-K
8
Internal Revenue Service. Form W-9 (Rev. March 2024)
9
Internal Revenue Service. Backup Withholding
10
Internal Revenue Service. Instructions for Form W-8BEN-E
11
Internal Revenue Service. Form 8809 – Application for Extension of Time to File Information Returns
12
Internal Revenue Service. Information Return Penalties