Who Gets a 1099-MISC and Who Doesn't

The IRS rule: you issue a 1099-MISC when you pay a non-employee for services

A 1099-MISC goes to anyone you paid $600 or more during the year for work or services — but only if that person is not your employee. The threshold is $600 in a calendar year, and it applies to most types of non-employee payments: freelance work, consulting, repairs, professional services, rent paid to an individual landlord, and prizes or awards over $600.

The key distinction is employment status. If someone is on your payroll and you withhold taxes from their paychecks, you file a W-2, not a 1099-MISC. If you paid them as an independent contractor — meaning you did not withhold taxes and they are responsible for their own tax filing — you file a 1099-MISC if the total reaches $600.

You file the 1099-MISC with the IRS and send a copy to the recipient by January 31 of the following year. The person who received the payment uses it to report their income on their own tax return.

Key Takeaways

• Issue a 1099-MISC to any non-employee you paid $600 or more in a calendar year for services, work, or other compensation.
• The $600 threshold applies to the total paid to one person in one year, not per transaction or per invoice.
• Do not issue a 1099-MISC to employees, corporations, or LLCs taxed as corporations — those have different reporting rules.
• You must send the 1099-MISC to the recipient and file a copy with the IRS by January 31 of the following year.
• Failure to issue a required 1099-MISC can result in IRS penalties, and the recipient may not have the documentation they need to file their taxes correctly.

Who counts as a non-employee contractor

A non-employee contractor is someone who works for you but is not on your payroll. They control how and when they do the work, they may work for other clients, and they are responsible for paying their own self-employment taxes. Common examples include freelance writers, plumbers, electricians, accountants, graphic designers, consultants, and handypeople hired for one-time jobs.

The IRS uses a three-part test to determine whether someone is truly an independent contractor or should be classified as an employee. The test looks at behavioral control (do you direct how the work is done?), financial control (do they provide their own tools and set their own rates?), and the relationship type (is it ongoing or temporary, do they work for others?). If you have significant control over how someone works, they are likely an employee, not a contractor.

Misclassifying an employee as a contractor to avoid payroll taxes is illegal and can trigger IRS audits, back taxes, penalties, and interest. If you are unsure whether someone should be classified as an employee or contractor, the IRS Form SS-8 can help you document the relationship for IRS review.

Payments that do not require a 1099-MISC

Several categories of payments do not trigger a 1099-MISC requirement, even if they exceed $600. Payments to corporations and to LLCs taxed as corporations do not require a 1099-MISC — those entities file their own tax returns and report income differently. Payments to sole proprietors and single-member LLCs taxed as sole proprietorships do require a 1099-MISC if they hit $600.

Payments for goods (as opposed to services) do not require a 1099-MISC. If you buy inventory, materials, or products from a vendor, you do not issue a 1099-MISC even if the total exceeds $600. Payments to credit card processors, payment platforms, and merchant services also follow different rules — those are reported on Form 1099-K, not 1099-MISC.

Rent paid to a corporation or to a property management company does not require a 1099-MISC. Rent paid directly to an individual landlord does require one if it totals $600 or more in the year. Medical and health care payments, legal settlements, and certain prize winnings have their own reporting forms and thresholds.

The $600 threshold and how to track it

The $600 rule applies to payments made to a single person in a single calendar year. If you paid a contractor $400 in 2023 and $300 in 2024, you do not issue a 1099-MISC for either year because neither year reaches $600. If you paid them $400 in 2023 and $250 in 2024, you still do not issue one. But if you paid them $500 in 2023 and $150 in 2024, you issue a 1099-MISC for 2024 because the 2024 total is separate.

Track payments by contractor name and tax ID number (usually their Social Security number or EIN). Keep invoices, receipts, cancelled checks, or bank statements showing the date, amount, and what the payment was for. At year-end, total up all payments to each contractor. If the total is $600 or more, you must issue a 1099-MISC.

Some accounting software and payment platforms (like PayPal, Square, or Stripe) track these totals for you and can generate 1099-MISC forms. If you pay contractors through your business bank account, your bank statements provide a record. The key is having documentation that shows who you paid, when, and how much.

What information you need from the contractor

Before you can issue a 1099-MISC, you need the contractor's name, address, and tax identification number. For most individuals, that is their Social Security number (SSN). For businesses structured as sole proprietorships, it is still the SSN. For partnerships, S-corps, or C-corps, it is their Employer Identification Number (EIN).

You should collect this information on a Form W-9 before you start paying the contractor. The W-9 is not filed with the IRS — it is a record you keep for your files. It protects you because it documents that the contractor gave you their correct tax ID. If the ID turns out to be wrong and the IRS later contacts you, you have evidence that you requested the correct information.

If a contractor refuses to provide a W-9 or gives you incorrect information, 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's way of ensuring that contractors with tax compliance issues still have taxes withheld.

Common mistakes in 1099-MISC reporting

The most common mistake is issuing a 1099-MISC to someone who should not receive one — usually because the payer did not verify the recipient's business structure. Issuing a 1099-MISC to a corporation or to an LLC taxed as a corporation is incorrect and can confuse the recipient's tax filing. Always ask the contractor what type of business entity they are and request a W-9 to confirm.

Another frequent error is using the wrong tax ID. If you issue a 1099-MISC with an incorrect SSN or EIN, the IRS cannot match it to the recipient's tax return, and both you and the contractor may face follow-up notices. Double-check the tax ID on the W-9 before you file the 1099-MISC.

Failing to issue a 1099-MISC when required is also common, especially for cash payments or one-time jobs. The IRS expects you to track and report all non-employee payments that total $600 or more, regardless of how you paid. If you do not issue a required 1099-MISC and the IRS discovers the unreported income during an audit, you may face penalties of $50 to $280 per missing form, depending on how long the violation went undetected.

Timing and filing important date

You must send a copy of the 1099-MISC to the contractor by January 31 of the year following payment. You must file the forms with the IRS by the same date. If January 31 falls on a weekend or holiday, the important date moves to the next business day.

You file 1099-MISC forms with the IRS using Form 1096, which is a cover sheet that summarizes all the 1099-MISC forms you are submitting. You can file on paper or electronically through the IRS e-file system. Most tax software and accounting platforms can generate and file these forms for you.

If you realize you made an error on a 1099-MISC after you have already filed it, you can file a corrected form using Form 1099-MISC marked "CORRECTED" in the top left corner. Send the corrected form to the recipient and file it with the IRS as soon as you discover the error.

Frequently Asked Questions

Do I need to issue a 1099-MISC if I paid someone less than $600?

No. The IRS threshold is $600 per person per calendar year. If you paid a contractor $500 total in 2024, you do not issue a 1099-MISC. However, the contractor must still report that income on their tax return, and you should keep records of the payment for your own files.

What if I paid a contractor in cash?

Cash payments are treated the same as check or bank transfer payments. If the total cash paid to one contractor reaches $600 in a calendar year, you must issue a 1099-MISC. Keep records of the dates, amounts, and what the work was for — receipts, invoices, or a log in your accounting system all count.

Do I issue a 1099-MISC to an LLC?

It depends on how the LLC is taxed. If it is a single-member LLC taxed as a sole proprietorship, yes — issue a 1099-MISC if payments total $600 or more. If it is a multi-member LLC or an LLC taxed as a corporation, no — do not issue a 1099-MISC. Ask the LLC owner for a W-9 to confirm their tax classification.

What happens if I do not issue a required 1099-MISC?

The IRS can assess penalties of $50 to $280 per missing form, depending on when the violation is discovered. The contractor may also not have the documentation they need to file their taxes correctly, which could trigger an IRS notice to them. It is simpler and cheaper to issue the forms on time.

Can I issue a 1099-MISC for partial-year work?

Yes. If you hired a contractor partway through the year and paid them $600 or more before year-end, you issue a 1099-MISC for that year. The form covers all payments made in that calendar year, regardless of when the work started or ended.