Who Has to Send You a 1099 Form

The basic rule: you issue a 1099 if you paid someone who is not your employee

You must issue a 1099 form when you pay a non-employee for work or services during the year. The IRS calls this person an independent contractor. The key difference: you do not withhold taxes from their pay, and they are responsible for reporting the income themselves. If you paid someone as an employee instead — meaning you controlled how, when, and where they worked — you issue a W-2, not a 1099.

The threshold that triggers the requirement depends on the type of 1099 you are issuing. For the most common form, 1099-NEC (nonemployee compensation), you must issue one if you paid a single person or business $600 or more in a calendar year for services. Some states have lower thresholds, and some industries have different rules entirely. The $600 rule applies to payments you made for work — not to payments for goods you bought to resell, and not to payments made to corporations (with narrow exceptions).

The person you paid must give you their Taxpayer Identification Number (TIN) — usually a Social Security Number or Employer Identification Number — before or at the time of payment. If they do not provide it, you are required to withhold 24 percent of their pay and send it to the IRS under backup withholding rules.

Key Takeaways

• You must issue a 1099-NEC if you paid any person or sole proprietorship $600 or more for services in a calendar year.
• You do not issue a 1099 to employees (you issue them a W-2 instead), to corporations, or for payments for goods rather than services.
• You need the payee's Taxpayer Identification Number before you pay them, and you must report it on the 1099 you send to the IRS.
• You must send the 1099 to the payee by January 31 and file it with the IRS by the same date (or February 28 if filing on paper).
• If someone does not give you their TIN, you must withhold 24 percent of their payment and report it as backup withholding.

When the $600 threshold does not explore

Certain types of payments have different reporting thresholds or are exempt entirely. 1099-MISC (miscellaneous income) covers rent, royalties, and prizes, and the $600 threshold applies there too. However, payments for medical and health care services, and payments to attorneys, have their own forms and rules.

You do not issue any 1099 for payments to a C corporation or S corporation, even if you paid them thousands of dollars. Corporations are assumed to have their own accounting and tax reporting. The exception is if you paid a corporation for medical or health care services — those still require reporting on a 1099-NEC.

Payments for goods — inventory you bought to resell, office supplies, materials — do not trigger a 1099 requirement, even if the total exceeds $600. The 1099 system is designed to track income from services and other non-goods payments. If you are unsure whether a payment is for goods or services, the rule is whether the payee is primarily providing their labor or informed versus delivering a finished product.

Who counts as an independent contractor versus an employee

The IRS uses a three-part test to decide whether someone is an employee or contractor: behavioral control, financial control, and the relationship between the parties. If you tell someone when to work, how to do the work, and what tools to use, they are likely an employee. If they control their own schedule, use their own equipment, and work for multiple clients, they are likely a contractor.

Financial control matters too. If you pay someone a regular salary, provide benefits, or reimburse their expenses, they look like an employee. If they invoice you, set their own rates, and bear the cost of their own equipment and supplies, they look like a contractor. The relationship also counts — if the work is permanent or ongoing, or if you provide training, the person is more likely an employee.

Misclassifying someone as a contractor when they should be an employee can result in back taxes, penalties, and interest. The IRS has audit programs specifically for this. If you are uncertain, you can file Form SS-8 with the IRS to ask them to make the information, though this takes time and does not may provide the answer you want.

How to collect and verify a Taxpayer Identification Number

Before you pay someone, ask them to complete Form W-9 (Request for Taxpayer Identification Number and Certification). This form collects their name, address, TIN, and a certification that the number is correct. You do not file the W-9 with the IRS — you keep it for your records. It protects you if the TIN turns out to be wrong, because the payee certified it under penalty of perjury.

If someone refuses to give you a TIN or gives you one that does not match IRS records, you must begin backup withholding. This means you withhold 24 percent of each payment and send it to the IRS on their behalf. You still issue a 1099 at year-end, but you report the amount withheld. The payee can stop backup withholding by providing a correct TIN and filing Form W-9 again.

For payments made electronically or by check, you can collect the W-9 before the first payment or at the time of payment. For one-time payments, collecting it before you pay is simpler. For ongoing relationships, you can collect it before the first payment and keep it on file for the duration of the relationship.

Timing: when to issue and file 1099s

You must send a copy of the 1099 to the payee by January 31 of the year following the payment. You must file the original with the IRS by the same date if filing electronically, or by February 28 if filing on paper. Missing these important date can result in penalties — the IRS charges $50 to $270 per form depending on how late you file and whether the failure was intentional.

You file 1099s with the IRS using Form 1096 (Annual Summary and Transmittal of U.S. Information Returns), which is a cover sheet that lists all the 1099s you are sending. If you file electronically through the IRS Filing Information Returns Electronically (FIRE) system or through a tax software provider, the 1096 is usually generated automatically.

If you discover an error on a 1099 after you have filed it, you can file a corrected version called a 1099-X. You send this to both the payee and the IRS. If the error is small and you catch it before filing, it is simpler to file the correct version and not file the incorrect one at all.

State reporting requirements

Many states require you to file 1099s with the state tax authority as well as the IRS. Some states have lower thresholds than the federal $600 — for example, some states require reporting of payments over $100 or $200. A few states do not require 1099 filing at all. You should check your state's tax agency website or speak with a tax professional to learn what your state requires.

State filing important date usually match the federal important date of January 31, though some states give you until February 28 or later. Some states accept the federal 1099 data directly; others require you to file a separate state form. If you use tax software or a payroll service, they often handle state filing automatically if you provide your state information.

Frequently Asked Questions

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

Yes. The form of payment does not matter — cash, check, credit card, or bank transfer all trigger the same reporting requirement if the total reaches $600. The IRS requires you to report the income regardless of how you paid it. Keep records of cash payments so you can document them if audited.

What if I paid someone less than $600 in a year?

You do not have to issue a 1099-NEC if the total is under $600. However, you still must report the income on your own tax return if you are self-employed or running a business. Some states have lower thresholds, so check your state rules. If you paid multiple people and one person received less than $600 but others received more, you only issue 1099s to those who crossed the threshold.

Do I issue a 1099 to a business partner or LLC member?

No. Payments to partners in a partnership or members of an LLC that is taxed as a partnership are not reported on a 1099. Instead, the business issues a Schedule K-1 to each partner or member showing their share of income. If the LLC is taxed as a corporation, the rules for corporations explore — no 1099 required.

What happens if I do not issue a 1099 when I should have?

The IRS can assess penalties ranging from $50 to $270 per missing or late form, depending on how late you file and whether the failure was intentional. More importantly, if the payee does not report the income on their tax return and the IRS matches your records to theirs, they may face an audit. You may also face questions about why the income was not reported.

Can I issue a 1099 to someone who is also my employee?

No. A person is either an employee or a contractor for a given year, not both. If someone worked for you as an employee for part of the year and as a contractor for another part, you issue a W-2 for the employee portion and a 1099 for the contractor portion, but only if the contractor payments exceed $600. Consult a tax professional if you are unsure how to split the income.