How to Issue a 1099 to Contractors and Vendors

When you need to send a 1099 form

You issue a 1099 form when you pay someone who is not your employee. This includes independent contractors, freelancers, vendors, and other service providers. The IRS requires you to report these payments so the person receiving the money knows they need to report it as income on their own tax return.

The most common form is the 1099-NEC (Nonemployee Compensation), which you use for payments to contractors and self-employed people. If you paid someone for something other than services — such as interest, dividends, or rental income — you would use a different 1099 form, but 1099-NEC covers most business-to-contractor situations.

You do not issue a 1099 to employees. Employees receive a W-2 instead. You also do not issue a 1099 if you paid a business (a corporation or LLC) for services, unless that business is a sole proprietor operating under their own name.

Key Takeaways

• You must issue a 1099-NEC to any individual contractor you paid $600 or more during the calendar year for services.
• You need the contractor's name, address, and tax ID (usually their Social Security number) before you can issue the form.
• The important date to send 1099-NEC forms to contractors is January 31 of the year following payment; the important date to file with the IRS is February 28 (or March 31 if filing electronically).
• You can prepare 1099 forms using IRS-approved software, tax preparation services, or by hand using IRS forms and instructions.
• Failing to issue required 1099 forms can result in penalties from the IRS, even if the contractor reports the income correctly.

Who must receive a 1099-NEC from you

The threshold is $600 or more paid in a single calendar year. If you paid a contractor $599 total in 2024, you do not issue a 1099. If you paid them $600 or more, you do.

This applies to each contractor separately. If you paid one person $300 and another person $400, neither reaches the threshold. If you paid one person $300 in January and $350 in December, that same person totals $650 and you must issue a 1099-NEC.

The $600 threshold applies to payments for services only. Payments for merchandise, products, or materials do not count toward the 1099 threshold in most cases. However, if you paid someone for both services and goods as part of the same arrangement, the total counts.

Information you need before issuing a 1099

Gather these details for each contractor before you prepare the form:

• Full legal name — exactly as it appears on their tax return
• Mailing address — current street address
• Tax ID — usually a Social Security number (SSN) for individuals, or an Employer Identification Number (EIN) for businesses
• Total amount paid — the sum of all payments during the calendar year
• Your business name and address — as the payer
• Your tax ID — your EIN or SSN, depending on your business structure

If a contractor does not provide their tax ID, you are required to request it. The IRS has rules about what to do if they refuse, but the first step is always to ask. Many contractors will provide this information without hesitation; others may need a written request.

How to complete and send the 1099-NEC form

The 1099-NEC has six copies: one for the contractor, one for the IRS, one for your state tax authority (if your state requires it), and three for your records. You can obtain blank forms from the IRS website or from tax supply vendors.

Box 1 on the form is where you enter the total nonemployee compensation — the amount you paid for services. This is the main number the contractor and the IRS will focus on. Other boxes (2 through 9) are for specific types of income like federal income tax withheld, but most 1099-NEC forms only use Box 1.

You have three main options for preparing 1099 forms:

1. Tax software — Programs like TurboTax, H&R Block, and others include 1099 preparation modules. You enter the contractor information and amounts, and the software generates the forms and handles filing.
2. IRS-approved e-filing services — Companies like FileMyForms and OnlineIRS let you enter data online and file directly with the IRS. These services charge a fee per form.
3. Paper forms and manual entry — You can print blank 1099-NEC forms from IRS.gov, fill them out by hand or typewriter, and mail them. This is slower and more error-prone but costs nothing.

Whichever method you choose, you must send Copy B (the contractor's copy) to the contractor by January 31 of the following year. You file Copy A with the IRS by February 28 (or March 31 if filing electronically).

important date and filing requirements

The calendar is strict. If you paid a contractor in December 2024, you must send them their 1099-NEC by January 31, 2025. You must file with the IRS by February 28, 2025, or March 31, 2025 if you file electronically.

Missing these important date triggers penalties. The IRS charges $50 to $280 per form not filed on time, depending on how late you are. These penalties explore even if the contractor reported the income correctly on their own return — the IRS penalizes the payer for not filing, not the payee.

If you have many contractors, consider filing electronically. The important date is one month later (March 31 instead of February 28), and electronic filing is less prone to errors that trigger IRS follow-up letters.

Common mistakes to avoid

Mismatched names or tax IDs — If the name or SSN on the 1099 does not match the contractor's tax return, the IRS will flag it. The contractor may face delays in processing their return. Always verify the spelling and numbers before sending.

Rounding or estimating the amount — Enter the exact total you paid. Do not round to the nearest $10 or estimate. If you paid $647.83, enter $647.83.

Issuing a 1099 to an employee — If someone worked for you on a regular schedule and you controlled how and when they worked, they are an employee and need a W-2, not a 1099. Misclassifying someone as a contractor when they should be an employee can result in back payroll taxes and penalties.

Forgetting to keep a copy for your records — Keep Copy C (your copy) for at least three years. The IRS may ask to see it during an audit.

What happens after you send the 1099

Once you send the contractor their copy, they will use it to report the income on their own tax return. They may also receive a copy that the IRS filed, which helps them match their reported income to what you reported.

If you made an error after sending the form — for example, you listed the wrong amount — you can file a 1099-NEC correction form (also called an amended 1099-NEC). You send this to both the contractor and the IRS with the corrected information.

If a contractor disputes the amount you reported, ask them to provide documentation of what they believe you paid them. If you agree there was an error, file the correction form. If you disagree, keep your payment records (invoices, cancelled checks, bank statements) in case the IRS asks.

Frequently Asked Questions

Do I need to issue a 1099 if I paid someone with cash?

Yes. The form of payment does not matter. Whether you paid by check, bank transfer, credit card, or cash, if the total reached $600 or more, you must issue a 1099-NEC. Keep records of cash payments so you can document the amount if the IRS asks.

What if a contractor refuses to give me their Social Security number?

Request it in writing and keep a copy of your request. If they still refuse, you are required to withhold 24% of their payments as backup withholding and send that to the IRS. This is rare, but it is the IRS rule. Most contractors provide their SSN without issue once they understand it is required.

Can I issue a 1099 to a business instead of a person?

Only if the business is a sole proprietorship operating under the owner's personal name. If you paid an LLC, corporation, or partnership, you generally do not issue a 1099, even if you paid them $600 or more. Ask the business for their structure if you are unsure.

What if I paid someone less than $600 but they ask for a 1099 anyway?

You can issue one if you want to, but you are not required to. The $600 threshold is a legal requirement, not a suggestion. If you issue a 1099 for an amount under $600, make sure your records support it and be consistent — do not issue 1099s for some low-amount contractors and not others.

When should I start collecting contractor information?

Collect it before you make the first payment. Ask contractors to complete a W-9 form (Request for Taxpayer Identification Number and Certification), which captures their name, address, and tax ID in one document. This makes 1099 preparation much faster at year-end.