How to Issue a 1099 Form to Your Contractors and Vendors

You issue a 1099 when you pay a non-employee for services or products

A 1099 form is a record you send to someone you paid money to — and to the IRS — when that person is not your employee. The most common version is the 1099-NEC (for non-employee compensation), which you use when you pay a contractor, freelancer, consultant, or vendor at least $600 in a calendar year. You are not filing a form with the government yourself; you are creating a document that the other person will use on their own tax return, and you are sending a copy to the IRS so the agency can cross-check their reported income.

The person receiving the 1099 is responsible for paying their own income tax and self-employment tax on that money. Your job is to track what you paid them, fill out the form accurately, and get it to them and the IRS by the important date — usually January 31 for the prior calendar year.

Key Takeaways

• You must issue a 1099-NEC to any non-employee you paid $600 or more during the calendar year for services or products.
• You need the recipient's full legal name, address, and tax identification number (usually their Social Security number or EIN) before you can complete the form.
• You send one copy to the recipient by January 31, another copy to the IRS, and keep a third copy for your records.
• The IRS matches 1099s against tax returns, so errors in names, addresses, or amounts can trigger notices to the recipient or audits.

Who counts as a non-employee requiring a 1099

You issue a 1099-NEC to someone if you paid them for work or goods and they are not on your payroll as an employee. This includes independent contractors, freelancers, consultants, vendors, and one-time service providers. The key distinction is control: if you tell someone what to do, how to do it, and when to do it, they are likely an employee and you should be running payroll instead. If they control their own work — they set their hours, use their own tools, work for other clients — they are a contractor and need a 1099.

The $600 threshold applies to payments made in a single calendar year. If you paid a contractor $400 in 2023 and $300 in 2024, you do not issue a 1099 for either year. But if you paid them $700 total in 2024, you issue one for 2024. Some states and some industries have lower thresholds, so check your state's requirements as well.

You do not issue a 1099-NEC to corporations (with rare exceptions), to other businesses you paid by credit card or third-party payment processor (those entities issue their own 1099-K), or to people you paid for personal services like housecleaning or lawn care in most cases — though some states require them for those too.

What information you need before issuing a 1099

Before you fill out a 1099-NEC, you need the recipient's legal name exactly as it appears on their tax return, their complete mailing address, and their tax identification number. For most individuals, that is their Social Security number (SSN). For a business or sole proprietor who has registered for one, it is their Employer Identification Number (EIN). You should ask for this information when you first hire or contract with someone — do not wait until year-end.

If someone refuses to give you their tax ID, you are required to withhold 24 percent of their payment as backup withholding and send it to the IRS. This is rare but happens when someone cannot or will not provide an SSN or EIN. Ask them directly, and if they still refuse, document the refusal and withhold the amount.

You also need to know the exact amount you paid them during the year. This should match your own records — invoices, cancelled checks, payment processor statements, or accounting software. If you use accounting software like QuickBooks or Xero, you can often pull a contractor payment report directly from it.

How to complete the 1099-NEC form itself

The 1099-NEC has boxes for your information (as the payer), the recipient's information, and the amount paid. Box 1 is "Nonemployee compensation" — this is where you enter the total amount you paid them for services. Other boxes exist for specific types of payment (royalties, medical payments, crop insurance proceeds), but most small business 1099s use only Box 1.

You can obtain blank 1099-NEC forms from the IRS website (irs.gov), from tax software, or from office supply stores. Many accounting software packages generate them automatically if you log your contractor payments correctly. If you use software, it often handles the formatting and filing for you — you enter the payment, and the software creates the form and tracks what you owe the IRS.

Fill in your name and address (or your business name and address), your EIN, the contractor's name and address, their tax ID, and the amount in Box 1. Make sure the name and address match what the contractor has on file with the IRS — mismatches trigger IRS notices. If you are unsure, ask the contractor to confirm their legal name and address before you send the form.

When and how to send the 1099-NEC to the recipient and the IRS

You must send a copy of the 1099-NEC to the recipient by January 31 of the year following the payment. For example, payments made in 2024 require a 1099 sent by January 31, 2025. You can mail it or, if the recipient has agreed, send it electronically.

You also file a copy with the IRS, along with a cover sheet called a 1096. If you have only one or two contractors, you can mail paper copies to the IRS address listed on the 1096 instructions. If you have many contractors, the IRS prefers electronic filing through the FIRE system (Filing Information Returns Electronically) or through a tax professional or software provider. The important date for filing with the IRS is also January 31 (though if January 31 falls on a weekend, the important date moves to the next business day).

Keep a copy for your own records. You will need it if the IRS asks questions about your contractor payments, and it helps you track your deductions and business expenses.

Common mistakes that trigger IRS notices

The most frequent error is a mismatch between the name or address on the 1099 and what the IRS has on file for that person. If you write "Bob Smith" but the IRS has "Robert Smith" or the address is wrong, the IRS will send a notice to the recipient asking them to correct their records. This does not mean you did anything wrong, but it creates extra work for them and can delay their refund.

Another common mistake is rounding or estimating the amount. Use the exact total you paid — do not round to the nearest $10 or $100. If you paid someone $1,247.50, enter $1,247.50, not $1,250. The IRS matches these amounts against what the contractor reports, and discrepancies can trigger an audit.

Issuing a 1099 to someone who should have been on payroll as an employee is also a red flag. If the IRS determines someone was misclassified as a contractor, you may owe back payroll taxes, penalties, and interest. When in doubt, consult a payroll professional or tax advisor about whether someone should be an employee.

What happens if you miss the important date or issue a 1099 late

If you miss the January 31 important date, the IRS can assess a penalty. The amount depends on how late you are: $50 per form if filed within 30 days late, $100 per form if filed more than 30 days late (up to $25,000 per year for small businesses). If you file more than 60 days late, the penalty is $250 per form.

If you realize in February that you forgot to issue a 1099 for someone you paid in the prior year, issue it when ready and include a note explaining the delay. The contractor will still be able to file their tax return, though they may have already filed without reporting that income — in which case they may need to file an amended return.

If you discover an error on a 1099 you already sent, file a corrected 1099-NEC (marked as a correction) and send it to both the recipient and the IRS. Do not just send a new one without marking it as a correction, because the IRS will see two forms and become confused about which amount is correct.

Frequently Asked Questions

Do I need to issue a 1099 if I paid someone with a credit card or PayPal?

No. If you paid through a third-party payment processor like PayPal, Square, or Stripe, that processor issues a 1099-K to the recipient and the IRS. You do not issue a separate 1099-NEC. However, if you paid by check or bank transfer, you are responsible for issuing the 1099-NEC yourself.

What if the contractor gave me a W-9 form?

A W-9 is a form the contractor fills out to provide you their tax ID and confirm they are not subject to backup withholding. You should ask for a W-9 before you pay someone, and keep it on file. It does not replace the 1099-NEC — you still issue the 1099 at year-end — but it ensures you have the correct information to fill it out.

Can I issue a 1099 electronically, or do I have to mail it?

You can send the 1099-NEC to the recipient electronically if they agree to receive it that way. Many contractors now expect electronic delivery. You can email it as a PDF or send it through your accounting software. The copy you file with the IRS must be submitted electronically if you have more than 250 forms; otherwise, you can mail paper copies.

What if a contractor's information changed after I paid them?

Use the name and address they provided when you hired them or when you made the payment. If they later tell you their name or address changed, ask them to confirm in writing and issue a corrected 1099-NEC. Do not guess or use information from a different source.

Do I issue a 1099 to my LLC or S-corp vendors?

Generally, no. You do not issue a 1099-NEC to a business entity (LLC, S-corp, C-corp) unless it is a single-member LLC that has not elected to be taxed as a corporation. If you are unsure whether a vendor is a sole proprietor or a business entity, ask them directly or check their business registration.