How To Send a 1099 to a Contractor

The basic steps for sending a 1099-NEC or 1099-MISC

You send a 1099 to a contractor by filing it with the IRS and mailing a copy to the contractor by January 31 of the year following payment. The form you use depends on what you paid for: Form 1099-NEC (Nonemployee Compensation) covers most contractor payments, while Form 1099-MISC (Miscellaneous Income) covers rent, royalties, and a few other categories. You file the forms with the IRS using either tax software, a tax professional, or the IRS Free File system if you meet income limits. At the same time, you send Copy B of the form directly to the contractor's address.

The important date is firm: the IRS and the contractor must both receive their copies by January 31. If you miss this date, you face penalties starting at $50 per form and climbing if the IRS has to contact you. The contractor needs the form to file their own tax return, so late delivery can create problems for them as well.

Key Takeaways

• You must file 1099-NEC for most contractor payments over $600 in a calendar year, and 1099-MISC for rent, royalties, and certain other payments over $600.
• Both the IRS and the contractor must receive their copies by January 31 of the following year, with no extensions available.
• You can file using tax software, a tax professional, or the IRS Free File system, and you mail Copy B to the contractor separately.
• Penalties for late or missing 1099s start at $50 per form and increase if the IRS contacts you first.
• You need the contractor's name, address, and Tax ID (usually their Social Security Number or EIN) before you can file.

Determining which form to use: 1099-NEC vs. 1099-MISC

Form 1099-NEC is the most common form for contractor payments. Use it when you pay someone who is not your employee for services — a freelancer, consultant, subcontractor, or vendor. This includes payments for writing, design, repairs, consulting, or any work performed by someone outside your business. The threshold is $600 in a calendar year; if you paid a contractor less than $600, you do not file a 1099-NEC.

Form 1099-MISC covers different kinds of income. Use it for rent you paid to a landlord, royalties paid to an author or artist, prizes and awards, or medical and health care payments. Like 1099-NEC, the $600 threshold applies to most categories on 1099-MISC. If a contractor receives both types of income from you — for example, you pay them for services and also rent a space from them — you file both forms.

If you are unsure which form applies, the IRS instructions for each form list the specific payment types. Your tax software will usually prompt you to choose based on the category of payment.

Gathering the contractor's information before you file

Before you can file a 1099, you need four pieces of information about the contractor: their legal name, their complete mailing address, their Tax ID, and your own business information. The Tax ID is usually the contractor's Social Security Number (SSN) if they are self-employed, or their Employer Identification Number (EIN) if they operate as a business entity.

Request this information from the contractor when you first hire them or make the first payment. Many businesses include a line on their contract or invoice asking for Tax ID and address. If you do not have the contractor's Tax ID, you cannot file the 1099, and you should contact them and ask for it. The IRS requires an exact match between the name and Tax ID on the form; mismatches trigger notices to both you and the contractor.

Keep records of all payments to the contractor throughout the year. Most accounting software tracks this automatically, but if you pay by check or bank transfer, save the receipts and invoices. You will need the total amount paid to fill in Box 1 of the 1099-NEC or the appropriate box on 1099-MISC.

Filing the 1099 with the IRS

You have three main routes to file: tax software, a tax professional, or the IRS Free File system. Tax software (such as TurboTax, H&R Block, or QuickBooks) walks you through entering contractor information and generates the forms for you. You then file electronically with the IRS. Most software charges a fee for 1099 filing, typically $15 to $50 per form depending on the provider.

A tax professional or accountant can prepare and file your 1099s as part of your business tax return or as a separate service. This is often the best option if you have many contractors or complex payment situations. The cost varies by provider and location.

The IRS Free File system may include 1099 filing if you meet income limits (usually under $79,000 in adjusted gross income). You can check which free software providers offer 1099 filing at IRS.gov. If you do not meet the income limit, you will need to pay for software or hire a professional.

You can also file on paper by mailing Form 1099-NEC or 1099-MISC directly to the IRS, along with Form 1096 (a summary sheet). However, electronic filing is faster and reduces errors. Paper filing takes longer to process and is more prone to rejection if information is incomplete or mismatched.

Mailing Copy B to the contractor

After you file with the IRS, you must send Copy B of the form to the contractor by January 31. This is a separate step from filing with the IRS — you cannot skip it even if you file electronically. Copy B is the contractor's copy and includes all the payment information they need to report on their own tax return.

Mail Copy B to the contractor's address using regular mail. Include a cover letter or note if you wish, but it is not required. The contractor's address should match the address you used on the form filed with the IRS. If the contractor has moved, use their current address; if you do not have a current address, contact them and ask for it before January 31.

Keep a record of when you mailed Copy B. If the contractor later claims they never received it, you can show that you mailed it on time. Some businesses use certified mail for this reason, though it is not required.

Common mistakes and how to avoid them

The most frequent error is mismatching the contractor's name and Tax ID. If the name on the form does not match the Tax ID exactly as it appears on the contractor's tax records, the IRS will send a notice to both you and the contractor. This does not necessarily mean you owe a penalty, but it creates extra work. Always ask the contractor to confirm their legal name and Tax ID in writing before you file.

Another common mistake is missing the January 31 important date. There are no extensions for 1099 filing. If you file late, you face a penalty of at least $50 per form. If the IRS contacts you first about a missing or late 1099, the penalty increases. Mark January 31 on your calendar and file by mid-January to give yourself a buffer.

Some businesses forget to file a 1099 for a contractor because the payment fell just under $600, or because they thought the contractor was an employee. Remember: if you paid a non-employee $600 or more in a calendar year, you must file a 1099. If you are unsure whether someone is an employee or a contractor, the IRS has a test (Form SS-8) that can help clarify, but most freelancers and outside vendors are contractors.

Finally, do not assume the contractor will track you down if they do not receive Copy B. It is your responsibility to send it. If the contractor does not have their copy by tax time, they may not file their return on time, and that can create problems for them — but you are still responsible for sending it.

What happens after you file

Once you file the 1099 with the IRS and mail Copy B to the contractor, your main obligation is complete. The IRS will match the 1099 information against the contractor's tax return when they file. If the contractor reports the income correctly, nothing else happens. If they do not report it or report a different amount, the IRS will contact them.

Keep a copy of the 1099 you filed for your own records for at least three years. If the IRS audits your business, you may need to show proof that you filed 1099s for all contractor payments. Your tax software or tax professional usually keeps these records for you.

If you discover an error on a 1099 after you have filed it, you can file a corrected form (Form 1099-NEC or 1099-MISC marked "CORRECTED") with the IRS and send a corrected Copy B to the contractor. This must be done before the contractor files their return, so act quickly if you find a mistake.

Frequently Asked Questions

Do I have to file a 1099 if I paid a contractor less than $600?

No. The IRS threshold is $600 in a calendar year. If you paid a contractor $599 total, you do not file a 1099. However, you should still keep records of the payment for your own business records and tax return.

What if the contractor does not give me their Tax ID?

You cannot file the 1099 without it. Contact the contractor and request their Social Security Number or EIN in writing. If they refuse or you cannot reach them, you may need to file the 1099 with the Tax ID marked as unknown, but this triggers an IRS notice. It is better to get the correct information before filing.

Can I email Copy B to the contractor instead of mailing it?

The IRS does not allow electronic delivery of Copy B. You must mail it. However, some tax software allows you to print and mail Copy B automatically as part of the filing process, which can save time.

What if I file the 1099 late — will I face a penalty?

Yes. Penalties start at $50 per form if you file after January 31. If the IRS contacts you first about a missing or late 1099, the penalty can be higher. File by mid-January to avoid this.

Do I need to file a 1099 for payments made by credit card or PayPal?

If you paid a contractor using a credit card or PayPal, the payment processor (like PayPal or Square) may issue a 1099-K to the contractor instead. However, you should still file a 1099-NEC or 1099-MISC if the payment meets the $600 threshold, because the 1099-K and your 1099 serve different purposes. Check with your tax professional if you are unsure.