Who to Send a 1099 To: NEC Threshold, Exceptions, and MISC

In the course of running your business, you generally need to send a 1099-NEC to any individual, sole proprietor, partnership, or LLC you paid $2,000 or more for services during the calendar year, unless the payee is taxed as a corporation or the payment falls into one of a handful of excluded categories. Deciding who to send a 1099 to comes down to three questions: how much you paid, what kind of entity you paid, and what the payment was for.¹

The $2,000 Threshold

For payments made after December 31, 2025, the reporting floor for a Form 1099-NEC is $2,000 per recipient for the year.² That’s up from the long-standing $600 threshold, and it will be adjusted for inflation starting in 2027.¹ The threshold applies to each payee separately. Pay one contractor $1,500 and another $3,000, and only the second one gets a form.

Only payments made in the course of your trade or business count. If you hired a handyman to fix something at your house, no 1099 is required no matter what you paid.³ Nonprofits and government entities are considered to be operating a trade or business for this purpose and follow the same rules as any for-profit payer.

Who Gets a 1099-NEC

Once a payee crosses $2,000, their tax classification decides whether you file. Send a 1099-NEC to:

Individuals and sole proprietors, whether they operate under their own name or a trade name.
General and limited partnerships that provided services to your business.
Single-member LLCs, which the IRS treats as disregarded entities and reports the same as sole proprietors, unless the LLC has elected to be taxed as a corporation.
Multi-member LLCs taxed as partnerships, unless they’ve elected corporate treatment.

The cleanest way to know which category a payee falls into is to collect a Form W-9 before you cut the first check. The W-9 gives you the payee’s legal name, taxpayer identification number, and tax classification, which is exactly the information you’ll need on the 1099.⁴

Who Does Not Get One

Some recipients are outside the 1099-NEC system entirely, even when you’ve paid them well over the threshold:

C-corporations and S-corporations, including LLCs that have elected to be taxed as a corporation. The W-9 has a specific checkbox for LLCs that have made that election, which is how you confirm it.³
Tax-exempt organizations, including 501(c)(3) charities, tax-exempt trusts such as IRAs and HSAs, and government entities.
Employees. Anyone you classify as an employee gets a W-2 instead.

Lawyers and Medical Providers: The Corporate Exceptions

Two professions break the corporate exemption because they so often operate through corporations. Payments of $2,000 or more to an attorney for legal services must be reported on Form 1099-NEC even if the firm is incorporated.⁵ Payments of $2,000 or more to physicians or other health care providers, including professional corporations, must be reported on Form 1099-MISC in Box 6; payments to tax-exempt hospitals and government-operated medical facilities are excepted.³

Attorney payments split further depending on what the money is for. Fees for the lawyer’s own legal services go on 1099-NEC in Box 1. Gross proceeds paid to a lawyer on behalf of a client, such as a settlement, go on 1099-MISC in Box 10.⁵

Payments That Never Trigger a 1099-NEC

The 1099-NEC covers services and labor. Several kinds of business spending are outside it regardless of who you paid or how much:

Merchandise and physical goods, including office supplies, raw materials, and inventory.⁵
Utilities such as telephone, electricity, and internet service.
Freight, shipping, and warehouse storage.

Card and Third-Party Network Payments

If you paid a contractor with a credit card, debit card, or third-party network like PayPal or Venmo, you do not issue a 1099-NEC for those amounts. The payment processor reports them on Form 1099-K instead, and issuing your own 1099 would double-report the income.³ If you paid the same contractor partly by check and partly by card, only the check payments count toward the $2,000 threshold. Track the payment methods separately.

When It’s a 1099-MISC Instead

Some payments to the same kinds of recipients travel on a different form. Common 1099-MISC categories include:²

Rent of $2,000 or more paid to a landlord for office space, equipment, or other business property.
Royalties of $10 or more.
Non-service prizes and awards of $2,000 or more.
Gross proceeds of $2,000 or more paid to an attorney on behalf of a client.
Crop insurance proceeds and fishing boat proceeds.
Medical and health care payments of $2,000 or more, reported in Box 6.

If a payment fits one of these boxes, use the 1099-MISC. If it’s compensation for services performed by a non-employee, use the 1099-NEC.

Foreign Contractors

Payments to nonresident alien contractors do not go on a 1099-NEC. They’re reported on Form 1042-S, which covers U.S.-source income paid to foreign persons, and you’re generally required to withhold 30% of the gross payment for federal income tax unless a tax treaty reduces the rate.⁶ Collect Form W-8BEN from a foreign individual or Form W-8BEN-E from a foreign entity in place of a W-9. A contractor claiming a treaty benefit for independent personal services performed in the United States files Form 8233 instead.

Confirming Who Falls Where

A W-9 in hand before the first payment is the single most useful thing you can do to answer the 1099 question later. It settles the classification issue, gives you a taxpayer identification number to file with, and starts backup withholding rules in your favor. If a contractor refuses to provide a W-9, or if a name and TIN combination you file doesn’t match IRS records, the IRS sends a CP2100 notice and you have to begin backup withholding at 24% on all future payments to that payee.⁷

You can head that off with the IRS’s free TIN Matching tool, which verifies a payee’s name and TIN against IRS records before you file. The interactive version returns results for up to 25 lookups at a time; the bulk version handles up to 100,000 within 24 hours.⁸

A Word on Employee vs. Contractor

The 1099 question only comes up if the worker is genuinely a non-employee. The IRS looks at three sets of factors to decide:⁹

Behavioral control. Do you direct how the work gets done, or only what result you want? Control over the how points toward employment.
Financial control. Does the worker invest in their own tools, market to other clients, and stand to make a profit or take a loss? Those point toward contractor status.
Relationship type. Written contracts, benefits, and work that’s central to your business all weigh toward employment.

Getting this wrong is expensive. A misclassified employee can leave you on the hook for unpaid employment taxes, including the employer share of Social Security and Medicare, plus penalties. When the answer is genuinely unclear, you can file Form SS-8 and ask the IRS to make the determination for you.⁹

Once classification is settled, the 1099 question follows the pattern above: check the amount, check the entity, check what the payment was for, and you’ll know whether a form is owed.

1
Internal Revenue Service. Form 1099-NEC and Independent Contractors
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Internal Revenue Service. 2026 Publication 1099 General Instructions for Certain Information Returns
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Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
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Internal Revenue Service. Forms and Associated Taxes for Independent Contractors
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Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
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Internal Revenue Service. Reporting Payments to Independent Contractors
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Internal Revenue Service. Backup Withholding B Program
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Internal Revenue Service. Taxpayer Identification Number (TIN) Matching Tools
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Internal Revenue Service. Worker Classification 101: Employee or Independent Contractor