How to Issue a 1099 to a Contractor or Freelancer

What you need to do to issue a 1099

A 1099 form reports non-employee income you paid to a contractor, freelancer, or vendor during the tax year. You issue it when you've paid someone at least $600 (in most cases) for services, and they are not your employee. The person who received the payment gets a copy, the IRS gets a copy, and you keep a copy for your records.

The form itself comes in several versions — the most common is the 1099-NEC (for nonemployee compensation) or 1099-MISC (for miscellaneous income). You fill in the contractor's name, address, and tax ID number, the amount you paid them, and submit it to the IRS by January 31 of the following year. You must also send a copy to the contractor by the same date.

If you're a small business owner, freelancer, or anyone who paid someone else for work, you likely need to issue at least one 1099. The IRS uses these forms to cross-check what contractors report on their own tax returns, so getting it right matters.

Key Takeaways

• You must issue a 1099-NEC or 1099-MISC when you pay a non-employee contractor $600 or more in a calendar year for services.
• You need the contractor's full legal name, current address, and either their Social Security Number or Employer Identification Number (EIN).
• The important date to send copies to contractors and file with the IRS is January 31 of the year following payment.
• You can obtain blank 1099 forms from the IRS website, tax software, or your accountant, and file them electronically or by mail.
• Failure to issue required 1099s can result in IRS penalties, so track all contractor payments throughout the year.

Gather the contractor's information before you start

Before you fill out any form, you need the contractor's details. Request their Taxpayer Identification Number (TIN), which is either their Social Security Number (SSN) if they're self-employed, or their Employer Identification Number (EIN) if they operate as a business entity. Ask for this information when you first hire them — don't wait until December.

You also need their full legal name (as it appears on their tax return), current mailing address, and phone number. If the information you have is incomplete or incorrect, the IRS will flag the form, and the contractor may face delays in filing their own return. If you can't reach the contractor for their TIN, the IRS requires you to backup withhold 24% of the payment, which complicates things for both of you.

Keep this information organized in a spreadsheet or accounting system as you make payments throughout the year. Waiting until January to hunt down details from contractors who've moved or changed their business structure wastes time and creates errors.

Determine which 1099 form to use

The 1099-NEC is used for nonemployee compensation — payments to independent contractors for services like consulting, writing, design, or repairs. This is the most common form for freelancers and contractors.

The 1099-MISC covers miscellaneous income, including rent paid to a landlord, royalties, or prizes. If you're paying someone for services, use the 1099-NEC. If you're paying for something else (like rent or royalties), use the 1099-MISC. Your accountant or tax software can help you choose if you're unsure.

There are other 1099 variants — the 1099-INT for interest, 1099-DIV for dividends, 1099-K for payment card transactions — but most small business owners only deal with 1099-NEC and 1099-MISC. Check with your accountant if the payment doesn't fit neatly into either category.

Fill out the form with payment amounts and dates

The 1099 form asks for the total amount paid to the contractor in Box 1 (for 1099-NEC) or the appropriate box for the type of income (for 1099-MISC). Enter the full dollar amount without cents if the form allows it, or with cents if required by your software. This should match what you actually paid them — add up all invoices and checks from January 1 through December 31 of that tax year.

You do not need to list individual payment dates or invoice numbers on the 1099 itself. The form only requires the total. However, keep your own records of each payment in case the IRS asks questions later or the contractor disputes the amount.

If you withheld taxes from the payment (which is rare for contractors but can happen), enter that amount in the appropriate withholding box. For most contractor payments, no withholding occurs, so you'll leave those boxes blank.

File with the IRS and send copies to the contractor

You have two filing options: electronic or paper. The IRS strongly prefers electronic filing through the FIRE system (Filing Information Returns Electronically) or through tax software that supports 1099 filing. Most tax software packages — including TurboTax, H&R Block, and QuickBooks — let you prepare and file 1099s directly.

If you file by paper, order official 1099 forms from the IRS (available at irs.gov), fill them out by hand or printer, and mail them to the IRS address listed in the instructions. Paper filing takes longer and is more prone to errors, so electronic filing is recommended if you have more than a few forms.

You must send a copy to the contractor by January 31. Many tax software platforms generate a PDF you can email or print and mail. The contractor needs this to file their own tax return. Keep a copy for your records — you may need it if the IRS questions the payment later.

Track the $600 threshold and keep records

The $600 minimum applies to most contractor payments, but there are exceptions. Payments to corporations are generally not reported on 1099s. Payments for merchandise or goods (as opposed to services) may not require a 1099. Medical and health care payments have a $600 threshold, but attorney fees have a $600 threshold as well. If you're unsure whether a specific payment requires a 1099, ask your accountant.

Keep records of every payment you make to contractors throughout the year — invoices, canceled checks, bank statements, or payment records from your accounting software. The IRS can audit these records, and you need proof that the amount on the 1099 is accurate. If you paid someone $599, you don't issue a 1099, but you still keep the record.

If you issue a 1099 with an error, you can file a corrected form (1099-NEC-C or 1099-MISC-C) with the IRS and send a corrected copy to the contractor. Do this as soon as you discover the mistake — don't wait until after you've already filed.

Penalties for not issuing 1099s

If you fail to issue a required 1099, the IRS can impose penalties. The amount depends on how late you file and whether the failure was intentional. Penalties can range from $50 to $280 per form, depending on how long after the important date you file. If the IRS determines the failure was intentional disregard of the rules, the penalty is higher.

Beyond IRS penalties, not issuing a 1099 can trigger an audit. The IRS cross-checks 1099s against contractor tax returns. If a contractor reports income that doesn't match a 1099 you should have issued, the IRS notices the discrepancy and may contact both of you.

The easiest way to avoid penalties is to track payments as you make them, gather contractor information upfront, and file by January 31. If you use accounting software or work with an accountant, they can help you stay on schedule.

Frequently Asked Questions

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

Yes. The requirement to issue a 1099 is based on the amount paid, not the payment method. If you paid a contractor $600 or more in cash during the year, you still need to issue a 1099. Keep records of the cash payments — receipts, invoices, or a log with dates and amounts — to support the form.

What if the contractor gives me a wrong tax ID number?

File the 1099 with the number they provided. If the IRS later tells you it's incorrect, you can file a corrected form. However, ask the contractor to verify their number before you file — it's easier to get it right the first time. If they refuse to provide a valid TIN, you're required to backup withhold 24% of the payment.

Can I issue a 1099 to a corporation?

Generally, no. Payments to C corporations and S corporations do not require a 1099-NEC. However, payments to sole proprietors, partnerships, and LLCs typically do. If you're unsure about the contractor's business structure, ask them directly or check their business registration.

What if I paid a contractor less than $600?

You do not need to issue a 1099 if the total paid is under $600. However, you should still keep records of the payment for your own accounting and tax purposes. If you paid multiple contractors and one of them received $600 or more total, issue a 1099 for that person only.

When should I ask for the contractor's tax ID?

Ask for it before you make the first payment or at the time you hire them. Waiting until December makes it harder to track down. Many contractors expect this question and have the information ready. If they delay providing it, follow up — you need it to file on time.