Do I Need to Send 1099s to My Contractors?

Yes — if you paid a contractor $600 or more during the year for services rendered to your business, you're generally required to send them a Form 1099-NEC and file a copy with the IRS.

That's the short version. The longer version has a few important exceptions that trip people up every January.

What exactly is the $600 threshold?

It applies per contractor, per calendar year — and it's cumulative. If you paid one person $200 in March, $250 in July, and $200 in November, that's $650 total. One 1099 required.

Pay someone $599 across twelve months — no 1099. Hit $600 — you're on the hook.

What form do contractors actually receive?

Form 1099-NEC (Nonemployee Compensation). This replaced 1099-MISC as the standard form for contractor payments starting with tax year 2020.

You may still hear "1099-MISC" out of habit. For someone you hired to perform services and paid directly, 1099-NEC is the right form.

Who gets a 1099-NEC — and who doesn't?

This is where most business owners get confused.

Who does get a 1099-NEC:

Sole proprietors
Single-member LLCs (taxed as a disregarded entity)
Partnerships
Individual freelancers and consultants

Who generally does NOT:

Corporations (C-corps and S-corps) — payments to incorporated businesses are typically exempt. The main exception: attorneys and law firms get a 1099 regardless of how they're incorporated.
Anyone you paid via credit card, debit card, PayPal, or a similar third-party payment network — those payments are reported by the payment processor on Form 1099-K. You don't issue a 1099-NEC on top of that.

The W-9 your contractor fills out will tell you their entity type — which is exactly why you collect it before the first payment, not after.

How do I find out what kind of entity my contractor is?

Ask for a Form W-9 before you pay anyone. Every contractor or freelancer you hire for business services should complete one.

A W-9 captures:

Their legal name and business name
Entity type (individual, LLC, S-corp, partnership, etc.)
Tax ID number (SSN or EIN)

Without it, you don't know whether they're exempt from a 1099, and you won't have what you need to file one if they're not. The right time to ask is before the first invoice clears — not in January.

What if I already paid someone and never collected a W-9?

Reach out now and request it. Most contractors expect this and will send it over without issue.

If someone refuses to provide their tax information, you may be required to withhold 24% of future payments as backup withholding and remit that to the IRS. That's usually all the nudge people need.

When are 1099-NECs due?

January 31 — for both copies. That's the deadline to send the contractor their copy and file with the IRS. Unlike some other tax forms, 1099-NEC doesn't get a later deadline. If January 31 falls on a weekend, the deadline shifts to the next business day.

Plan for this in December. If you wait until the last week of January to discover you're missing W-9s, you're already behind.

What happens if I don't file?

Penalties vary by how late the filing is — smaller for catching it quickly, higher the longer it goes. Intentional disregard carries the steepest tier. These penalty amounts are adjusted periodically, so confirm the current figures on IRS.gov.

There's also a practical risk: the IRS cross-references what contractors report as income against what their clients report as payments. Missing 1099-NECs create discrepancies that can draw scrutiny on both sides.

Do I need to file with the IRS directly, or just mail the contractor?

Both. You send the contractor their copy and separately report to the IRS.

If you're filing 10 or more information returns in a year — counting 1099s, W-2s, and other forms combined — you're required to file electronically. The IRS FIRE system handles electronic submissions, and most accounting or payroll software can submit on your behalf. For smaller volumes, paper filing is still permitted.

The part people often miss: rent and other payments

Form 1099-NEC covers contractor payments for services. Other payment types have their own forms:

Rent paid to a non-corporate landlord (office space, storage, equipment) — reported on Form 1099-MISC, Box 1, if it hits $600 for the year
Gross proceeds paid to attorneys — also 1099-MISC, Box 10
Interest payments to individuals — Form 1099-INT

If you lease your workspace directly from an individual rather than a property management company, that's a separate 1099-MISC obligation worth knowing about.

If you're behind, here's the order to work through it

Pull a list of every vendor or contractor you paid $600 or more this year.
Flag which ones are individuals, sole proprietors, or partnerships — not corporations.
Remove anyone you paid exclusively by credit card or third-party payment network.
For everyone remaining without a W-9 on file: request one now.
Issue 1099-NECs by January 31.

For future years: collect the W-9 before the first payment. Make it part of your contractor onboarding alongside the signed agreement and payment terms.

This is general information about federal tax filing requirements, not tax advice for your specific situation. Rules in this area have nuances depending on your business structure and payment methods — consult a tax professional to confirm how they apply to you.