If your business, nonprofit, or government agency paid a non-employee $600 or more for services during the calendar year, you generally need to file a 1099. That is the short answer to who needs to file a 1099, and it covers most situations. The obligation sits on the payer, not the person getting paid, and different kinds of payments go on different 1099 forms with their own thresholds. Personal payments from your household, like paying a plumber to fix a pipe at home or hiring a babysitter, do not count.
Who Counts as a Filer
Federal tax law puts the reporting duty on anyone making payments “in the course of a trade or business.”1Office of the Law Revision Counsel. 26 U.S. Code 6041 – Information at Source That covers corporations and partnerships, and it also reaches nonprofits and government agencies that pay outside contractors.2Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025) If your organization pays someone who is not on your payroll to perform work, you are likely on the hook.
The clean exemption is personal, non-business spending. Payments tied to a business activity are reportable; payments from your personal life are not.
The $600 Rule and Which Form Applies
Most contractor payments go on Form 1099-NEC. You file one when you pay $600 or more to a single person or unincorporated business for services during the year.3Internal Revenue Service. Am I Required to File a Form 1099 or Other Information Return? The $600 is cumulative for the calendar year, so four $150 payments to the same freelancer cross the line. The category includes fees, commissions, and prizes or awards for services performed as a non-employee.2Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025)
Payments for physical goods generally do not require a 1099. When a contractor’s invoice bundles materials and labor, the full amount is reportable as long as the payment covers services.3Internal Revenue Service. Am I Required to File a Form 1099 or Other Information Return?
Income that is not compensation for services goes on Form 1099-MISC. The $600 threshold applies to rent payments, prizes and awards unrelated to services, medical and health care payments, and gross proceeds paid to attorneys in settlement situations.4Internal Revenue Service. About Form 1099-MISC, Miscellaneous Information Royalty payments have a much lower bar: report them at just $10 or more.5Internal Revenue Service. General Instructions for Certain Information Returns (2026)
Attorney payments split across both forms depending on the reason. Fees you pay a lawyer for services go on the 1099-NEC. Gross proceeds from a legal settlement where the lawyer receives the funds go on the 1099-MISC (Box 10).2Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025)
When a Payment App Is Involved
If you paid your contractor through a credit card processor or a third-party payment app, the payment network may handle the reporting instead of you. Under the threshold reinstated by recent legislation, third-party settlement organizations must file Form 1099-K only when payments to a single payee exceed $20,000 and the number of transactions exceeds 200 in a calendar year.6Internal Revenue Service. IRS Issues FAQs on Form 1099-K Threshold Under the One, Big, Beautiful Bill Both conditions must be met.
Here is where people get caught out. If you paid a contractor $5,000 through a payment app and the network does not issue a 1099-K because the thresholds were not met, you are still responsible for issuing a 1099-NEC. The income has to appear on one form or the other.7Internal Revenue Service. What to Do with Form 1099-K
Payments to Corporations
Most payments to corporations, including LLCs taxed as C or S corporations, are exempt from 1099 reporting. Two categories are exceptions and remain reportable regardless of entity type:2Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025)
- Legal services. Attorney fees paid to a law firm organized as a corporation go on the 1099-NEC. Settlement proceeds paid to a corporate law firm go on the 1099-MISC.
- Medical and health care payments. Payments of $600 or more to corporate medical providers, including professional corporations, get reported on the 1099-MISC in Box 6.
So when a new vendor’s W-9 shows they are incorporated, do not automatically skip the 1099. Check whether the payment falls into one of those two carve-outs first.
Get a W-9 Before You Pay
The single most important step happens before you write the first check: request a completed Form W-9 from every contractor or service provider.8Internal Revenue Service. About Form W-9, Request for Taxpayer Identification Number and Certification The W-9 gives you the payee’s legal name, business name, entity type, and taxpayer identification number. Without it, you are guessing at information that has to be exact on the 1099.
If a contractor refuses to provide a W-9 or gives you an obviously incomplete one, you are required to withhold 24% of every payment and send it to the IRS as backup withholding.9Internal Revenue Service. Backup Withholding That tends to get contractors’ attention. Collect W-9s at the start of the relationship, before money changes hands, and you avoid chasing people down at year-end.
If the name or TIN on your filed 1099 does not match IRS records, the IRS sends a CP2100 or CP2100A notice. You then send the payee a “B-Notice” along with a blank W-9 asking them to correct the discrepancy. A second mismatch within three years triggers a second B-Notice and requires you to begin backup withholding on future payments until the issue is resolved.10Internal Revenue Service. Backup Withholding “B” Program
When the Forms Are Due
The two main forms have different deadlines:
- Form 1099-NEC is due January 31 for both filing with the IRS and furnishing copies to recipients, whether on paper or electronic.2Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025)
- Form 1099-MISC recipient copies are due January 31. The IRS copy is due February 28 on paper, or March 31 if filed electronically.5Internal Revenue Service. General Instructions for Certain Information Returns (2026)
When a due date falls on a weekend or federal holiday, it shifts to the next business day. The January 31 date for the 1099-NEC catches most small businesses off guard because it leaves very little time after the calendar year ends to compile everything.
Electronic Filing Is Now the Default
Starting with tax year 2023, any business filing 10 or more information returns in a calendar year must file electronically.11Internal Revenue Service. Topic No. 801, Who Must File Information Returns Electronically The count is aggregate across almost all return types, so five 1099-NECs and five 1099-MISCs put you at the threshold. The old rule was 250 returns per form type, so this change pulled many smaller businesses into mandatory e-filing.
The IRS offers the older FIRE system for bulk filers and the newer web-based IRIS portal, which most small filers find easier and which accepts both 1099-NEC and 1099-MISC.12Internal Revenue Service. E-File Information Returns with IRIS
What It Costs to Skip It
The IRS charges a per-form penalty for each 1099 filed late or incorrectly, and a separate penalty for each recipient statement not furnished on time. For returns due in 2026, the per-form amounts are: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.
These add up fast with multiple contractors. A business that ignores the filing requirement for 20 contractors and never files could face $6,800 in penalties before any other consequences. The intentional disregard tier is especially costly because it removes the annual cap that otherwise limits total penalties for smaller filers.
State Filing Is Separate
Filing 1099s with the IRS does not automatically satisfy your state obligations. Many states require separate 1099 filings, particularly when state income tax was withheld. The IRS runs a Combined Federal/State Filing Program that forwards electronically filed returns to participating states, which can eliminate the need for a separate state submission.14Internal Revenue Service. Topic No. 804, FIRE System Test Files and Combined Federal/State Filing Program Some participating states still require you to notify them that you are using the program. Check with your state’s tax agency to confirm whether the federal forwarding covers your obligation.