Who Gets a 1099-NEC: $600 Threshold, Exemptions, and W-9 Use

A business sends a Form 1099-NEC to any non-corporate service provider it paid $600 or more during the calendar year. That covers most independent contractors, freelancers, sole proprietors, single-member LLCs, and partnerships. Corporations are generally excluded, with two important exceptions: attorneys always get one, and federal executive agencies must report payments to corporate vendors. Payments made by credit card or through platforms like PayPal are handled by the payment processor on Form 1099-K, not by you.

The $600 Threshold and Who Counts as a Payer

The filing obligation is triggered when total payments to a single service provider reach $600 or more between January 1 and December 31. Every check, direct deposit, and cash payment counts toward that total.¹ Below $600, you have no filing obligation, though the recipient still owes tax on the income.

Only payers engaged in a trade or business need to file. A homeowner paying a neighbor to mow a private lawn is off the hook because the payment is personal. The definition of trade or business is broad, though: it covers for-profit companies, nonprofit organizations, and federal, state, and local government agencies.² A nonprofit that hires an outside consultant for $600 has the same reporting duty as a Fortune 500 corporation.

Contractors, Freelancers, and Small Businesses That Get the Form

The typical recipient is an independent contractor or freelancer operating as a sole proprietor: consultants, graphic designers, writers, accountants, tradespeople, and similar professionals who provide services outside a payroll relationship. Beyond individual sole proprietors, you also issue a 1099-NEC to:

Single-member LLCs that the IRS treats as disregarded entities, since they are taxed as sole proprietors.¹
Partnerships that received $600 or more for services.
Multi-member LLCs taxed as partnerships.

The way to tell these apart from exempt corporate vendors is the W-9 the payee returns. An LLC that checks the box for sole proprietor or partnership on its W-9 gets a 1099-NEC. An LLC that checks C-corporation or S-corporation generally does not.

Attorneys and Law Firms Always Get One

Legal fees are the biggest exception to the corporate exemption. When your business pays a law firm $600 or more for services, you must issue a 1099-NEC no matter how the firm is organized. That includes law firms structured as C-corporations, S-corporations, LLCs, or partnerships. The IRS instructions specifically require this so legal fees are tracked regardless of tax structure.³ Litigation counsel, transactional advice, consultations — all of it qualifies.

Federal Executive Agencies Have a Wider Rule

Federal executive agencies must report service payments to vendors on the 1099-NEC even when those vendors are corporations. That obligation is broader than what applies to private businesses and it goes in Box 1 of the form.¹

Who Does Not Get a 1099-NEC

Most Corporations

C-corporations and S-corporations generally do not receive a 1099-NEC for services they provide. If a vendor’s W-9 shows a corporate tax classification, you can typically skip the form. The exceptions already covered above are attorneys and payments by federal executive agencies.¹ Check the W-9 before assuming a vendor is exempt. An LLC taxed as a corporation qualifies for the exemption; an LLC taxed as a sole proprietorship or partnership does not.

Vendors You Paid for Products, Freight, or Storage

The 1099-NEC covers services, not merchandise. Payments for goods, freight, storage, telephone charges, and similar items are excluded from reporting.³ Buy $5,000 of computer equipment from a supplier and no 1099-NEC is required. If a single vendor sold you both a product and a service, only the service portion counts toward the $600 threshold.

Tax-Exempt Organizations and Government Entities

You do not issue a 1099-NEC to tax-exempt organizations, the United States government, state governments, the District of Columbia, U.S. territories, or foreign governments for payments you make to them.¹ Note the direction of that rule. These entities are exempt from receiving the form, but they still have to issue 1099-NECs to their own contractors.

Medical and Health Care Providers (Different Form)

Payments of $600 or more for medical or health care services do get reported, but on Form 1099-MISC in Box 6, not the 1099-NEC. That reporting applies even when the provider is a corporation, because the general corporate exemption does not extend to medical payments. Tax-exempt hospitals and government-owned medical facilities remain exempt.¹

Credit Card and Third-Party Payments Are Handled by the Processor

If you paid a contractor by credit card, debit card, or a third-party payment network such as PayPal or Venmo, do not report those amounts on a 1099-NEC. The payment processor handles the reporting on Form 1099-K.¹ For the 2026 tax year, the 1099-K reporting threshold reverts to $20,000 in gross payments and more than 200 transactions.⁴

Say you paid a freelancer $3,000 entirely by credit card. You issue no 1099-NEC; the card issuer takes care of it. But if you paid the same freelancer $2,000 by check and $1,000 by credit card, you issue a 1099-NEC for the $2,000 in check payments only. Double-counting the credit card portion is one of the most common mistakes on these forms.

Using the W-9 To Sort Payees Into the Right Bucket

The cleanest way to answer “does this vendor get a 1099-NEC” is to collect a Form W-9 before you make the first payment. The W-9 gives you everything you need: legal name, business name if different, tax classification, taxpayer identification number, and current address.⁵

The tax classification line is what tells you which rule applies:

Sole proprietor, single-member LLC (disregarded), partnership, or multi-member LLC taxed as a partnership: issue a 1099-NEC at $600.
C-corporation or S-corporation: no 1099-NEC unless the vendor is a law firm or you are a federal executive agency.
Any provider of medical or health care services: use Form 1099-MISC Box 6 instead, regardless of entity type (with the tax-exempt and government facility exception noted above).

Collecting the W-9 up front, rather than scrambling for it in January, is what makes this system work. If a payee refuses to provide a valid TIN, backup withholding rules kick in and 24 percent of each future payment goes to the IRS.⁶

One last point for recipients: if you earned $600 or more from a business and never received a 1099-NEC, you still owe tax on the income and must report it on your return. The payer’s failure to file does not erase your obligation.

1
Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025)
2
Internal Revenue Service. Reporting Payments to Independent Contractors
3
Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (Rev. April 2025)
4
Internal Revenue Service. IRS Issues FAQs on Form 1099-K Threshold Under the One Big Beautiful Bill
5
Internal Revenue Service. Form W-9 (Rev. March 2024)
6
Internal Revenue Service. Backup Withholding