When Do You Need to Issue a 1099? Complete Guide

## Understanding 1099 Filing Requirements

As a business owner or self-employed individual, knowing when to issue 1099 forms is crucial for tax compliance. This guide covers everything you need to know about 1099 filing requirements.

The $600 Rule

• The most important threshold to remember is $600. You must issue a 1099-NEC if you paid:
• $600 or more to any single contractor
• For services performed for your trade or business
• To someone who is NOT your employee

What Counts Toward $600? - Consulting fees - Professional services - Freelance work - Contract labor - Commissions to non-employees

Who Receives a 1099-NEC?

You MUST Issue 1099-NEC To: - Independent contractors - Freelancers - Consultants - Sole proprietors - Partnerships - LLCs taxed as sole proprietors or partnerships - Attorneys (even if they're a corporation)

You DO NOT Issue 1099 To: - Employees (they get W-2s) - C Corporations - S Corporations (with few exceptions) - Payments under $600 - Personal (non-business) payments - Payments made via credit card, debit card, PayPal, Venmo (payment processor issues 1099-K)

Corporation Exceptions

While you generally don't issue 1099s to corporations, there are exceptions:

Always Issue 1099 To Corporations For: - Attorney fees (legal services) - Medical and healthcare payments - Fish purchases for cash - Gross proceeds paid to attorneys

The W-9 Connection

• Before paying any contractor, you should collect Form W-9, which provides:
• Legal name
• Tax classification (sole proprietor, LLC, corporation, etc.)
• Tax Identification Number (SSN or EIN)
• Address

Pro Tip: Collect W-9 BEFORE making the first payment. It's much harder to get this information later.

Payment Methods Matter

You Issue 1099: - Cash payments - Check payments - Direct bank transfers (ACH) - Wire transfers

Payment Processor Issues 1099-K: - Credit card payments - Debit card payments - PayPal, Venmo, Square (third-party networks)

Important: If you paid a contractor $5,000 by check and $2,000 by credit card, you issue 1099-NEC for $5,000 only. The credit card portion is reported on 1099-K by the payment processor.

Trade or Business Requirement

You only need to issue 1099s for payments made in the course of your trade or business. This means:

Business Payments (1099 Required): - Paying a contractor to build your business website - Hiring a freelance writer for your company blog - Engaging a consultant for business advice

Personal Payments (No 1099): - Paying someone to clean your home - Hiring a contractor for personal home repairs - Personal investment activities

What Happens If You Don't File?

Penalties for Not Filing: - **$60 per form** if corrected within 30 days - **$120 per form** if corrected by August 1 - **$310 per form** if filed after August 1 or not filed - **$630 per form** for intentional disregard

Additional Consequences: - IRS matching program may flag discrepancies - Possible audit trigger - You may lose the deduction for those payments

1099-MISC vs 1099-NEC: Which to Use?

| Payment Type | Form | |-------------|------| | Independent contractor payments | 1099-NEC | | Rent payments | 1099-MISC | | Royalties | 1099-MISC | | Prizes and awards | 1099-MISC | | Medical/healthcare payments | 1099-MISC | | Attorney settlements | 1099-MISC |

Practical Examples

Example 1: Web Developer You paid a freelance web developer $8,000 to build your company website. - **Issue 1099-NEC?** YES - over $600 for services

Example 2: Office Supplies You paid Office Depot $2,000 for supplies. - **Issue 1099?** NO - corporation, product purchase

Example 3: Landlord You paid $12,000 in rent for your office space. - **Issue 1099-MISC?** YES - rent over $600

Example 4: Credit Card Payment You paid a graphic designer $1,500 via credit card. - **Issue 1099-NEC?** NO - payment processor handles it

Best Practices

1. **Collect W-9 upfront** - Before making any payment
2. **Track all payments** - Use accounting software
3. **Verify TINs** - Use IRS TIN matching service
4. **File on time** - January 31 deadline for 1099-NEC
5. **Keep records** - Maintain copies for 4+ years

Create Your 1099 Forms

Ready to file your 1099s? Quick Paystub makes it easy:

• 1099-NEC for contractor payments
• 1099-MISC for rent and other payments
• Instant PDF download
• IRS-compliant format

[Generate Your 1099 Forms Now →](/)

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*This guide is for informational purposes only. Consult a tax professional for advice specific to your situation.*