How to Issue a 1099 Form to a Contractor or Freelancer

What you need to do to send a 1099

To issue a 1099 form, you collect the contractor's tax identification number (either their Social Security Number or Employer Identification Number), report the payments you made to them during the year on the correct 1099 form type, file a copy with the IRS, and send a copy to the contractor by January 31. The specific form you use depends on what you paid for — 1099-NEC for non-employee compensation, 1099-MISC for miscellaneous income, or other variants for specific payment types.

You do not need permission from the contractor to issue a 1099, and you do not need to ask them first. However, you do need their correct tax ID number before you file anything with the IRS. If you paid someone and do not have their tax ID, you should contact them and ask for it before year-end.

Key Takeaways

• You must file a 1099 with the IRS and send a copy to the contractor if you paid them $600 or more in a calendar year for services (the threshold varies by form type).
• The contractor must give you their Social Security Number or Employer Identification Number before you can file; if they refuse or give you a false number, you report that to the IRS on Form W-9.
• You file the 1099 forms with the IRS by February 28 (or March 31 if filing electronically), and you send the contractor their copy by January 31.
• Different 1099 forms exist for different payment types: 1099-NEC for independent contractor work, 1099-MISC for rent or royalties, 1099-INT for interest, and others.
• If you pay a contractor through a payment processor like PayPal or Square, that processor may issue the 1099 instead of you, depending on the payment volume and your state.

When you must issue a 1099

The threshold for issuing a 1099 depends on the form type and the kind of payment. For 1099-NEC (non-employee compensation), you must file if you paid a contractor $600 or more in a calendar year. For 1099-MISC (miscellaneous income), the threshold is also $600 for most categories, though rent paid to a landlord has a $20 threshold and royalties have a $10 threshold.

The $600 threshold applies only to payments for services or work. If you reimbursed someone for expenses they incurred on your behalf, that is not reportable income and does not count toward the threshold. Similarly, if you paid a corporation (as opposed to a sole proprietor or partnership), you generally do not issue a 1099-NEC, though you may issue other forms depending on the payment type.

You count all payments made in a single calendar year, even if they were made in separate transactions. If you paid a freelancer $300 in March and $400 in November, that totals $700 and triggers the 1099 requirement.

Collecting the contractor's tax identification number

Before you can file a 1099, you need the contractor's tax identification number. For most individuals, this is their Social Security Number (SSN). For businesses, it is their Employer Identification Number (EIN). You should collect this information when you first hire the contractor, not at year-end.

The standard way to collect this is to ask the contractor to complete Form W-9, which is a straightforward one-page form where they write their name, address, and tax ID. You do not file the W-9 with the IRS — you keep it for your records. The contractor should sign it and date it. If a contractor refuses to provide a W-9 or gives you a number you suspect is false, you must withhold 24 percent of their payments and send that to the IRS as backup withholding.

If the contractor gives you a number and you later discover it is incorrect or does not match their name, you still file the 1099 with the number they gave you, but you should note the discrepancy in your records. The IRS will catch mismatches when the contractor files their tax return.

Choosing the correct 1099 form type

The IRS issues different 1099 forms for different kinds of income. The most common form for paying independent contractors or freelancers is the 1099-NEC (Nonemployee Compensation). Use this form if you paid someone to perform services for you — writing, design, consulting, repairs, or any other work — and they were not your employee.

Use 1099-MISC (Miscellaneous Income) if you paid rent to a landlord, royalties to an author or artist, or prizes and awards. Some older payments that would have gone on 1099-MISC now go on 1099-NEC as of 2020, so check the IRS instructions for the year you are reporting.

Other 1099 forms exist for specific situations: 1099-INT for interest income, 1099-DIV for dividends, 1099-K for payment card transactions, and others. If you are unsure which form applies, the IRS website has a form-matching tool, or you can consult a tax professional.

Filing the 1099 with the IRS and sending it to the contractor

You file 1099 forms with the IRS using Form 1096, which is a cover sheet that lists all the 1099s you are submitting. You can file on paper or electronically. Paper forms must reach the IRS by February 28 of the year after payment. Electronic filing has a important date of March 31.

At the same time, you must send a copy of the 1099 to the contractor by January 31. This is the copy marked "Copy B — For Recipient." You can send it by mail or, if the contractor has agreed in writing, by email or through an online portal. Keep a copy for your records.

If you file electronically, the IRS has a system called FIRE (Filing Information Returns Electronically) that accepts 1099s. Many tax software providers and payroll services can file on your behalf for a fee. If you file on paper, you will need to obtain the official IRS forms or use forms that match the IRS specifications exactly.

What happens if a payment processor issues the 1099 instead

If you pay a contractor through a third-party payment processor — PayPal, Square, Stripe, Venmo, or similar — that processor may issue a 1099-K or 1099-NEC to the contractor instead of you. This depends on the total payment volume and your state's rules. Generally, if a processor handles more than $20,000 and more than 200 transactions in a year, it must report that to the IRS.

If the processor issues the 1099, you do not need to issue a separate one. However, you should still keep records of what you paid for, because the processor's 1099 will show only the gross payment amount, not what it was for. The contractor will need that information to report the income correctly on their tax return.

If you pay through a processor but the payment volume is below the reporting threshold, you may still need to issue a 1099 yourself if you meet the $600 threshold. Check with the processor to see whether they will be reporting the payment to the IRS.

Common mistakes to avoid

One of the most common mistakes is using the wrong tax identification number. If you file a 1099 with an incorrect SSN or EIN, the IRS will not be able to match it to the contractor's tax return, and both you and the contractor may face penalties. Always verify the number on the W-9 before you file.

Another mistake is failing to issue a 1099 when you should have. If you paid someone $600 or more and did not file a 1099, the IRS may assess a penalty against you. The penalty is usually $50 to $280 per form, depending on how late you file and whether the failure was intentional.

A third mistake is issuing a 1099 to a corporation. Corporations are not required to receive 1099-NEC forms for services. If you paid a corporation, you generally do not issue a 1099-NEC, though you may issue other forms depending on the type of payment. Always confirm whether the contractor is a sole proprietor, partnership, or corporation before deciding which form to use.

Frequently Asked Questions

What if I paid someone in cash and do not have a record of their tax ID?

You should contact the person and ask for their tax ID before year-end. If they refuse or you cannot reach them, you can file the 1099 with their name and address but leave the tax ID blank and check the box marked "FATCA filing requirement." The IRS will attempt to match the form to their tax return using their name and address alone. However, this is not ideal and may result in penalties for you.

Can I issue a 1099 to a family member?

Yes, if the family member is not your employee and you paid them $600 or more for services in a calendar year, you must issue a 1099. The relationship does not matter — the tax rules are the same. You still need their tax ID and must file the form with the IRS and send a copy to them by the important date.

What if the contractor disputes the amount I reported on the 1099?

If the contractor believes the amount is wrong, they should contact you to discuss it. If you agree the amount is incorrect, you can file an amended 1099 (marked as a correction) with the IRS and send a corrected copy to the contractor. File the amended form as soon as you discover the error. If you disagree about the amount, the contractor can report a different amount on their tax return, and the IRS will sort out the discrepancy when they compare the two documents.

Do I need to issue a 1099 if I paid by credit card or through PayPal?

If you paid through a payment processor, the processor may issue a 1099-K or 1099-NEC instead of you. Check with the processor to see whether they will report the payment. If they will not, or if the payment is below their reporting threshold, you must issue a 1099 yourself if the total payments to that contractor reached $600 or more in the year.

What is the penalty for not issuing a 1099 when I should have?

The IRS penalty for failing to file a 1099 ranges from $50 to $280 per form, depending on how late you file and whether the failure was intentional. If you file more than 30 days late, the penalty is higher. If you can show reasonable cause for the delay, you may be able to reduce or eliminate the penalty.