Who Does Not Need a 1099: Corporations, Employees, and Goods

You do not need to issue a 1099 for payments made outside a trade or business, for payments to most corporations, for purchases of physical goods, or for transactions run through a credit card or third-party payment app. For the 2026 tax year, the reporting floor for both Form 1099-NEC and most Form 1099-MISC categories also rose from $600 to $2,000 per payee, so many smaller payments no longer require a form at all.¹ Several other categories of payees, from government agencies to employees on your payroll, are exempt regardless of the amount.

Personal Payments Outside a Trade or Business

The 1099 obligation applies only to payments made in the course of a trade or business. Federal law limits reporting to persons “engaged in a trade or business and making payment in the course of such trade or business.”² If you hire a landscaper for your yard, a plumber for your kitchen, or a painter for your living room as a private homeowner, you do not need to file a 1099 or collect a W-9, no matter how much you pay.

The reason is that 1099 reporting exists to track business deductions and the income that flows from them. Personal spending does not create a deduction, so there is no gap for the IRS to monitor. The distinction turns on the payor, not the payee. The same contractor who mows your lawn on the weekend may receive a 1099 from a property management company that hires them for commercial work during the week.

Household Workers Are a Different Category

If you regularly hire someone to work in your home — such as a nanny, housekeeper, or home health aide — and you control how they do the work, that person is generally a household employee rather than an independent contractor. Household employees do not receive a 1099. You may instead owe employment taxes and need to file a W-2 once their cash wages reach $3,000 in 2026.³ Below that amount, you generally have no filing obligation for that worker.

Payments Below the 2026 Reporting Threshold

Starting with payments made after December 31, 2025, the threshold for Form 1099-NEC and most Form 1099-MISC categories jumped from $600 to $2,000 per payee per calendar year.¹ If you pay a contractor less than $2,000 total during 2026, no 1099-NEC is required. The same $2,000 floor covers most 1099-MISC categories, including rents, prizes, and other income.

The threshold is measured on the aggregate amount paid to a single payee across the whole calendar year, not per invoice or per project. A business that pays a freelance designer $800 in March and $1,100 in September has paid $1,900 for the year and owes no 1099. A final $200 payment in December that pushes the total to $2,100 pulls the payee back into reporting.

One exception sits well below the general floor. Royalties and broker payments in lieu of dividends still carry a $10 threshold on Form 1099-MISC.⁴

Payments to Corporations

You generally do not need to issue a 1099 to a corporation, whether it is a C-corporation, an S-corporation, or an LLC that elects to be treated as either.⁵ When a vendor returns a W-9 showing it is incorporated, the corporate exemption typically applies. Corporations already file their own detailed returns with the IRS, which is the reasoning behind the carve-out.

Two exceptions override that exemption:

Attorney fees and legal settlements. Any payment for legal services, including gross proceeds paid to a lawyer, must be reported even if the law firm is incorporated.⁶
Medical and healthcare payments. Payments to corporations that provide medical or healthcare services, or that handle billing and collecting for those services, remain reportable on Form 1099-MISC. Government-owned hospitals and tax-exempt hospitals under Section 501(c)(3) are excluded from this exception.⁷

The cleanest way to know which side of the line a vendor falls on is to collect a Form W-9 before the first payment. The entity classification the vendor checks tells you whether the corporate exemption applies or whether one of the two exceptions puts the payment back into reporting.

Purchases of Goods and Merchandise

Buying physical products does not trigger a 1099. The reporting system targets payments for services, rents, and similar income streams, not purchases of tangible goods, raw materials, or merchandise. Office furniture, inventory bought for resale, and manufacturing supplies are exempt. Freight and storage costs tied to those goods are also excluded from reporting.⁵

Mixed Invoices With Parts and Labor

Many invoices combine materials and labor on a single bill. The rule turns on whether the parts were incidental to performing a service. If they were, as when an auto repair shop lists parts and labor separately under one repair contract, you report the total, parts included.⁵ You cannot subtract the materials portion. If you are simply buying goods from a vendor who happens to deliver them, the transaction stays a product purchase and no 1099 is needed.

Payments by Credit Card or Payment App

When you pay a contractor by credit card, debit card, or a third-party payment platform such as PayPal or Venmo, you do not issue a 1099-NEC, even if the total tops $2,000.⁸ Reporting shifts to the payment settlement entity, which files Form 1099-K with the IRS instead. This prevents the same income from being reported twice.

The 1099-K threshold for third-party settlement organizations like payment apps and online marketplaces is $20,000 and more than 200 transactions per payee per year. The American Rescue Plan Act of 2021 had lowered that floor to $600, but legislation signed in July 2025 retroactively repealed the change and restored the original thresholds.⁹ Credit and debit card transactions have no dollar threshold; the card processor reports every payment regardless of amount.¹⁰

Keep records of the payment method for each contractor. If the IRS ever asks why no 1099-NEC was issued for a vendor you paid several thousand dollars, the card or app payment trail is the answer.

Government Agencies and Tax-Exempt Organizations

Payments to federal, state, or local government bodies, including agencies, instrumentalities, and political subdivisions, are generally exempt from 1099 reporting.¹¹ The same treatment extends to tax-exempt organizations recognized under Section 501(a) of the Internal Revenue Code. Permit fees paid to a city agency, or a consulting fee paid to a 501(c)(3) nonprofit, do not require a 1099. Again, the W-9 tells you which category a payee belongs to.

Employees Get a W-2, Not a 1099

Employees never receive a 1099. Their compensation is reported on Form W-2, which accounts for income tax withholding, Social Security, and Medicare taxes already deducted from their paychecks.¹ Form 1099-NEC is reserved for workers who are not your employees but who provide services to your business.

The line between the two can be uncertain. The IRS weighs three categories of evidence when evaluating worker status: behavioral control (whether you direct what the worker does and how they do it), financial control (how the worker is paid, whether expenses are reimbursed, and who supplies the tools), and the type of relationship (written contracts, employee-type benefits, expectation of an ongoing relationship, and whether the work is a core part of your business). No single factor is decisive.¹² Remote work alone does not make someone an independent contractor. If you control what will be done and how, the worker is still an employee.

Getting this wrong is expensive. If you issue a 1099-NEC to someone the IRS later reclassifies as an employee, your business can be held liable for the employment taxes you failed to withhold.¹² Either you or the worker can file Form SS-8 with the IRS to request an official determination when the status is unclear.¹³

Rent Paid Through a Property Manager

If your business pays rent to a real estate agent or property manager rather than to the property owner directly, you do not file a 1099-MISC for that rent. The reporting duty shifts to the agent or manager, who then files a 1099-MISC reporting the rent paid over to the owner.⁵ This applies only when the payment goes to a management intermediary. Rent you send straight to the owner still runs under the standard $2,000 threshold and normal reporting rules.

1
Internal Revenue Service. Form 1099-NEC and Independent Contractors
2
Office of the Law Revision Counsel. 26 U.S. Code 6041 – Information at Source
3
Internal Revenue Service. Publication 926, Household Employer’s Tax Guide
4
Internal Revenue Service. About Form 1099-MISC, Miscellaneous Information
5
Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
6
Federal Register. Reporting of Gross Proceeds Payments to Attorneys
7
GovInfo. 26 CFR 1.6041-3 – Payments for Which No Return of Information Is Required Under Section 6041
8
Office of the Law Revision Counsel. 26 U.S.C. 6050W – Returns Relating to Payments Made in Settlement of Payment Card and Third Party Network Transactions
9
Internal Revenue Service. Form 1099-K FAQs
10
Internal Revenue Service. Understanding Your Form 1099-K
11
Internal Revenue Service. Form 1099 Reporting for Federal Agencies
12
Internal Revenue Service. Independent Contractor (Self-Employed) or Employee?
13
Internal Revenue Service. About Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding