How To Generate and Send a 1099 Form to Your Contractor

Who generates a 1099 and when

You generate a 1099 if you paid a contractor or freelancer $600 or more during the calendar year for services. The threshold is $600 for most work — though certain categories like attorney fees have different minimums. You are responsible for creating and sending the form, not the person who did the work.

The most common form is the 1099-NEC (Nonemployee Compensation), which covers independent contractors, consultants, and freelancers. If you paid someone through a payment processor like PayPal, Stripe, or Square, that processor may have already sent them a 1099-K instead — but you still need to send a 1099-NEC if you paid $600 or more directly.

You must send the form to the contractor by January 31 of the year following payment, and file a copy with the IRS by the same date. If you miss the important date, you can still file late, but penalties explore.

Key Takeaways

• You must issue a 1099-NEC to any contractor or freelancer you paid $600 or more in a calendar year for services.
• The form shows the contractor's name, address, tax ID, and the total amount you paid them — nothing more.
• You can generate a 1099-NEC using IRS-approved software, a tax preparation service, or by hand using IRS Form 1099-NEC and instructions.
• You send one copy to the contractor and file another with the IRS by January 31, along with a summary form called a 1096.
• If you use a payment processor like PayPal or Stripe, check whether they issued a 1099-K to your contractor — you may still owe a 1099-NEC if you paid over $600.

Gathering the information you need before you start

Before you generate the form, collect four pieces of information: the contractor's full name, their mailing address, their tax ID (either a Social Security Number or Employer Identification Number), and the total amount you paid them during the year. If you do not have their tax ID, you must request it using Form W-9 before you pay them — do not guess or leave it blank.

Add up all payments to that person across the entire calendar year, including cash, check, bank transfer, and payment app payments. Do not subtract expenses, refunds, or taxes — report the gross amount you paid. If the total is under $600, you do not need to issue a 1099-NEC, though you can choose to anyway.

If you paid multiple contractors, you will need this information for each one. Organize it in a spreadsheet or list before you start generating forms, because you will need to file a summary with the IRS that totals all your 1099s.

Three ways to generate a 1099-NEC

Tax software is the fastest route for most people. Programs like TurboTax, H&R Block, and TaxAct have sections for business owners to enter contractor information and generate 1099-NEC forms. The software walks you through each field, catches common errors, and can file the forms with the IRS electronically. Most charge $15 to $50 per form or offer a flat fee for unlimited forms.

Payroll and accounting services like Guidepoint, ADP, and QuickBooks can generate 1099s as part of their platform. If you already use one of these for invoicing or bookkeeping, generating a 1099 is usually a few clicks. These services typically handle filing with the IRS for you, though you still send the copy to the contractor yourself.

Filling out the form by hand is free but slower. read Form 1099-NEC and the instructions from IRS.gov. The form has boxes for the contractor's information and the amount paid. You fill it out in triplicate (one copy for the contractor, one for the IRS, one for your records), print it, sign it, and mail it. You also need to file Form 1096 (a summary cover sheet) with the IRS copy. This route works if you have only one or two contractors, but becomes tedious at scale.

What information goes in each box

Box 1a on the 1099-NEC is where you enter the total amount you paid the contractor. This is the gross amount — the full sum before any deductions. Box 1b is for non-employee compensation specifically, and for most freelancers and contractors, boxes 1a and 1b will show the same number.

Boxes 2 through 7 are for specific types of income: medical and health care payments, federal income tax withheld, fishing boat proceeds, and so on. Most small business owners leave these blank. Only fill them if the payment falls into one of those categories.

The top section asks for your business name, address, and tax ID. The middle section asks for the contractor's name, address, and tax ID. Double-check the spelling and numbers — mismatches between the form and the contractor's tax return can trigger IRS notices to both of you.

Sending the form to the contractor

Print or provide the contractor with Copy B of the 1099-NEC by January 31. You can mail it, email it as a PDF, or hand it to them in person. The contractor needs this form to file their own tax return, so send it early enough that they have time to receive it and use it.

Include a cover letter or note explaining what the form is and what they should do with it. Many contractors are familiar with 1099s, but some are not, and a brief explanation prevents confusion. You can write something straightforward like: "Attached is your 1099-NEC for [year]. Please use this form when you file your tax return. If the information is incorrect, contact me within 30 days."

Keep a copy for your records. You do not need to file this copy with the IRS, but you should keep it with your business records in case of an audit.

Filing with the IRS

You have two options: file electronically or file by mail. Electronic filing is faster and more reliable. Use IRS-approved software or a tax service that offers e-filing. You will need to create an account on the IRS FIRE system (Filing Information Returns Electronically) or use a third-party provider. The important date is January 31.

If you file by mail, print Copy A of each 1099-NEC and attach them to Form 1096, which is a cover sheet that summarizes all your 1099s. The 1096 asks for your name, address, tax ID, and the total amount reported across all forms. Mail the packet to the IRS address listed in the Form 1096 instructions — the address varies by state.

If you file after January 31, the IRS charges a penalty. The amount depends on how late you file: $50 per form if you file within 30 days, $100 per form if you file more than 30 days late. You can request a waiver if you have reasonable cause, but it is easier to file on time.

Common mistakes to avoid

The most frequent error is entering the wrong tax ID or misspelling the contractor's name. The IRS matches 1099s to tax returns using the name and tax ID, so if either one is wrong, the contractor may receive a notice asking them to explain the discrepancy. Ask the contractor to confirm their information before you file.

Another mistake is reporting payments to an employee as a 1099. If someone worked for you regularly, received a W-2, or you withheld taxes from their pay, they are an employee, not a contractor. Issuing a 1099 to an employee can trigger an IRS audit and penalties for misclassification.

Do not round or estimate the amount. Report the exact total you paid, down to the cent. If you paid $1,250.47, enter $1,250.47, not $1,250. Small discrepancies can flag the return for review.

What happens if you do not issue a 1099

If you paid a contractor $600 or more and do not issue a 1099, the IRS may assess penalties against you. The penalty is $50 per form if you file late, or up to $100 per form if you do not file at all. If the IRS discovers unreported contractor payments during an audit, you may also owe back taxes and interest.

The contractor may also face problems. If they do not report the income on their tax return and the IRS has no 1099 on file, they may not be caught. But if the IRS does discover the discrepancy, the contractor could owe back taxes, penalties, and interest. Issuing the 1099 protects both of you by creating a clear record.

Frequently Asked Questions

Do I need to issue a 1099 if I paid someone through PayPal or Stripe?

Not necessarily. If the payment processor issued a 1099-K to the contractor, you do not need to issue a separate 1099-NEC. However, if you paid the contractor $600 or more and the processor did not issue a 1099-K, you should issue a 1099-NEC. Ask the contractor whether they received a 1099-K, or check your processor's records to see what was reported.

What if the contractor did not give me a W-9 or tax ID?

You cannot issue a 1099 without a tax ID. Before you pay someone, ask them to complete Form W-9, which requests their name, address, and tax ID. If they refuse or do not provide one, do not pay them until they do. If you already paid them without a tax ID, contact them and request it before you file the 1099.

Can I issue a 1099 for work done in a previous year?

Yes, but only for the year in which you made the payment. If you paid a contractor in January 2024 for work they did in 2023, you issue a 2024 1099-NEC. The year on the form matches the calendar year you paid them, not the year they performed the work.

What if I made a mistake on a 1099 I already filed?

File a corrected 1099-NEC using Form 1099-NEC with the "CORRECTED" box checked. Send the corrected form to the contractor and file it with the IRS. You do not need to withdraw the original form — the IRS will use the corrected version.

Do I need to issue a 1099 to a business or corporation?

Generally, no. You issue 1099s to individuals and sole proprietors. If the contractor is a registered business entity (an LLC, S-corp, or C-corp), you typically do not need to issue a 1099. However, some states have different rules, so check your state's requirements or ask a tax professional.