When You Must Issue a 1099 to a Worker or Vendor

You must issue a 1099-NEC or 1099-MISC if you paid a non-employee at least $600 in a calendar year for services or products

The $600 threshold is the most important number. If you paid someone who is not on your payroll — a contractor, freelancer, vendor, or consultant — and that person received $600 or more from you in a single calendar year, you are required to send them a 1099 and file a copy with the IRS. This applies whether you paid them in cash, check, credit card, or bank transfer.

The form you use depends on what you paid for. Form 1099-NEC covers non-employee compensation — work performed by an independent contractor. Form 1099-MISC covers miscellaneous income like rent, royalties, or prizes. Most contractor payments go on 1099-NEC. You use 1099-MISC only if the payment does not fit the non-employee compensation category.

The person receiving the 1099 is responsible for reporting that income on their tax return. Your job is to report what you paid them to the IRS so the agency can match it against what they report. If you do not issue a required 1099, you may face penalties ranging from $50 to $280 per form, depending on how late you file and whether the failure was intentional.

Key Takeaways

• Issue a 1099-NEC to any non-employee who received $600 or more from you in a calendar year for services or work performed.
• The $600 threshold applies per person, per year — if you paid someone $400 in 2023 and $300 in 2024, you do not owe a 1099 either year.
• You must send the 1099 to the recipient by January 31 and file copies with the IRS by the same important date (or February 28 if filing on paper).
• Payments to corporations, sole proprietors with an EIN who request it, and certain other entities may be exempt from 1099 reporting requirements.
• You need the person's name, address, and tax ID (Social Security number or EIN) before you can issue the form.

Who counts as a non-employee requiring a 1099

A non-employee is anyone who is not on your payroll — meaning you do not withhold taxes, Social Security, or Medicare from their pay, and you do not provide them with a W-2 at year-end. This includes independent contractors, freelancers, consultants, vendors, and gig workers. The person's job title or how often you work with them does not matter. What matters is the payment structure: if you paid them without payroll deductions, they are a non-employee.

There are exceptions. You do not issue a 1099-NEC to a C corporation — a business registered as a corporation with the IRS. You also do not issue one to a sole proprietor or partnership if they give you a completed Form W-9 requesting that you do not report to them on a 1099. Some states have additional rules about payments to certain professionals like attorneys or accountants, so check your state's requirements if you are unsure.

Payments to family members are still reportable if they meet the $600 threshold and the person is not your employee. Payments to yourself or your spouse (if you are self-employed) do not require a 1099.

The $600 threshold and how it works

The $600 rule is straightforward: add up all payments to one person in a single calendar year (January 1 through December 31). If the total reaches $600 or more, you owe a 1099-NEC. If it stays below $600, you do not.

The threshold applies per person, not per transaction. You might pay someone $50 per week for 15 weeks — that is $750 total, so a 1099 is required. You might also pay 20 different vendors $400 each — none of them get a 1099 because each individual stayed under $600. Count only payments to the same person in the same year.

Some types of payments are excluded from the $600 calculation. Payments for goods (as opposed to services) do not count toward the threshold unless they are part of a service arrangement. Payments made to a business that is clearly a corporation also do not count. If you are unsure whether a payment counts, include it in your total — it is safer to issue a 1099 when in doubt than to miss one and face a penalty.

When to send the 1099 and where it goes

You must send a copy of the 1099-NEC to the recipient by January 31 of the year following the payment year. If you paid someone in 2024, they receive their copy by January 31, 2025. At the same time, you file copies with the IRS — also by January 31 if you file electronically, or by February 28 if you file on paper.

The recipient needs their copy so they can report the income on their tax return. The IRS copy lets the agency verify that the income was reported. Send the form to the address the person provided on their W-9 or to their last known address. Keep a copy for your records for at least three years.

If you discover an error after sending the 1099, you can file a corrected form (1099-NEC with a "CORRECTED" checkbox marked) with the IRS and send a copy to the recipient. Do this as soon as you catch the mistake rather than waiting until the next year.

What information you need to collect upfront

Before you can issue a 1099, you need the recipient's name, mailing address, and tax identification number. The tax ID is either their Social Security number (if they are a sole proprietor or individual) or their Employer Identification Number (EIN, if they are a business). You collect this information by having them complete a Form W-9 — Request for Taxpayer Identification Number and Certification.

Ask for the W-9 before you make the first payment, not after. If someone refuses to provide a W-9 or gives you incorrect information, you are required to withhold 24 percent of their payments as backup withholding and send that to the IRS. This is a penalty mechanism designed to encourage compliance. Most people will provide a W-9 without issue once you explain that you need it for tax reporting.

If the person's information changes — they move, change their business name, or provide a corrected tax ID — ask for an updated W-9. Use the most current information when you prepare the 1099.

Payments that do not require a 1099

Not every payment to a non-employee triggers a 1099 requirement. Payments to corporations are generally exempt — the corporation reports the income on its own tax return. Payments for goods only (inventory, supplies, materials) do not count unless they are bundled with services. Payments under $600 in a calendar year do not require a 1099.

Payments made through a payment settlement entity like PayPal, Stripe, or Square may be reported on a Form 1099-K instead of a 1099-NEC, depending on the payment volume and your state. If you use one of these platforms, check whether they are issuing 1099-Ks on your behalf — if so, you do not need to issue a separate 1099-NEC for those transactions.

Payments for rent go on Form 1099-MISC, not 1099-NEC, if the recipient is an individual (not a corporation). Payments for royalties also go on 1099-MISC. If you are unsure which form applies, the IRS instructions for each form spell out the categories clearly.

Common mistakes to avoid

The most common mistake is waiting until January to collect W-9 information. By then, you may have already paid the person and lost track of their details. Collect it upfront and keep it in your records.

Another frequent error is issuing a 1099 to a corporation. Corporations file their own returns and do not receive 1099s from vendors. If you are unsure whether someone is a corporation, ask them directly or check your state's business registration database.

Mismatching the person's name or tax ID on the 1099 is also problematic. The IRS matches 1099s to tax returns by name and Social Security number or EIN. If the information does not match exactly, the IRS may flag it as a discrepancy. Double-check the W-9 before you prepare the form.

Finally, do not assume that because you paid someone a small amount, you do not need to track it. Keep records of all payments to non-employees throughout the year so you can accurately total them when 1099 season arrives. A spreadsheet with the person's name, date, and amount is sufficient.

Frequently Asked Questions

Do I have to issue a 1099 if I paid someone in cash?

Yes. The payment method does not matter — cash, check, credit card, or bank transfer all count toward the $600 threshold. You are required to issue a 1099 if the total reaches $600, regardless of how you paid. Keep records of cash payments so you can document them if the IRS asks.

What if someone refuses to give me a W-9?

You are required to withhold 24 percent of their payments and send that withholding to the IRS as backup withholding. You still report the gross payment on a 1099-NEC using the name and address you have on file, but you note that backup withholding was applied. Most people provide a W-9 once they understand the withholding consequence.

Can I issue a 1099 to my spouse?

No. If your spouse is your employee, you issue a W-2. If your spouse is self-employed and works in your business, you do not issue a 1099 — they report the income on their own Schedule C. Spouses have special tax treatment that exempts them from 1099 reporting.

What happens if I miss the January 31 important date?

You may face a penalty of $50 to $280 per form, depending on how late you file and whether the IRS determines the failure was intentional. File the 1099 as soon as you realize you missed the important date. The IRS may waive penalties if you can show reasonable cause for the delay.

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

Not necessarily. If the payment platform issued a 1099-K on your behalf, you do not issue a separate 1099-NEC. However, if the platform did not issue a 1099-K and you paid the person $600 or more, you still owe a 1099-NEC. Check with your payment processor to confirm whether they are reporting the transaction to the IRS.