Do I Need to File a 1099 for a Contractor?

If your business paid an independent contractor $600 or more for services during 2025, you generally have to file a Form 1099-NEC, send one copy to the contractor and one to the IRS, both by January 31, 2026. The rule applies to sole proprietors, LLCs, partnerships, and nonprofits, not just corporations. You do not file a 1099 for payments to a corporation, for personal (non-business) payments, or for anything you paid through a credit card or an app like PayPal, because the processor reports those on a 1099-K instead. Starting with payments made in 2026, the threshold rises from $600 to $2,000.

When you have to file a 1099 for a contractor

The test has three parts, and all three have to be true. You file a 1099-NEC when, in the course of your trade or business, you paid $600 or more during the calendar year to a person or unincorporated business for services. Wages to an employee go on a W-2 instead, and that is a separate obligation with payroll tax attached. The 1099 is strictly for people you paid who are not on your payroll: freelancers, subcontractors, gig workers you hired directly, a bookkeeper, a web designer, a cleaner for your office.

"In the course of your trade or business" is the phrase that decides most edge cases. Paying a plumber $900 to fix the pipes at your rental property or your shop is a business payment and gets reported. Paying the same plumber $900 to fix the pipes in your own home is personal, and no 1099 is required. Nonprofits, government agencies, and even a landlord operating rental property as a business all count as payers who must issue 1099s.

One more trigger has no dollar floor: if you had to apply backup withholding to a contractor because they never gave you a valid taxpayer ID, you file a 1099-NEC no matter how little you paid.

1099-NEC or 1099-MISC: which form?

Since 2020 the IRS splits contractor pay onto its own form, the 1099-NEC, where NEC stands for nonemployee compensation. The older 1099-MISC still exists but now carries the odds and ends. For most businesses paying freelancers, the NEC is the only one you touch.

The attorney rule catches people out. Legal fees for services go on a 1099-NEC, and unlike almost every other payment, they are reportable even when the law firm is incorporated. If you are unsure whether a payment was for services, ask what you were buying: labor and expertise are services, physical goods are not, and payments purely for merchandise are never reported on a 1099.

The $600 threshold for 2025 and the $2,000 threshold for 2026

The reporting floor is changing, and the year the payment was made decides which number applies. The One Big Beautiful Bill Act, signed in July 2025, raised the 1099-NEC threshold from $600 to $2,000, but only for payments made on or after January 1, 2026. Every dollar paid in 2025 still lives under the old $600 rule.

The practical effect is narrow this year and wider next year. For the 1099s you prepare in January 2026, keep using $600. When you plan 2026 payments, you can skip the form for a one-off contractor you pay $1,500, though many businesses will keep issuing at the lower amount out of habit and because their bookkeeping software still defaults to it. There is no penalty for issuing a 1099 you did not strictly have to.

Who does not get a 1099

Three big categories are exempt, and missing them is the most common reason businesses over-file.

• Corporations. Payments to a C corporation or an S corporation are generally not reported, which is why collecting a W-9 first matters: the form tells you the entity type. The exceptions are legal fees and medical payments, which are reportable even to a corporation.
• Personal payments. Anything you paid outside a trade or business is off the hook. Hiring a photographer for your wedding, paying a tutor for your kid, or paying a handyman at your home does not generate a 1099.
• Card and app payments. If you paid the contractor by credit card, debit card, or a third-party network such as PayPal or Venmo for business, you do not file a 1099-NEC. The payment processor reports that money to the IRS on a 1099-K instead, and issuing your own 1099 would double-count it. Only cash, check, and ACH or bank transfer payments go on your 1099-NEC.

That last rule is the one that trips up small businesses paying contractors through modern tools. Before you cut a 1099, separate out what you paid by card or app and report only the checks, cash, and direct transfers.

How to file a 1099 for a contractor

The workflow is the same whether you have one contractor or forty, and it starts before you make the first payment.

1. Collect a W-9 up front. Have every contractor complete Form W-9 before you pay them. It gives you their legal name, taxpayer ID, and entity type, which is everything you need to decide whether a 1099 is required and to fill it out correctly. Chasing a W-9 in January, after the work is done and the contractor has moved on, is the single biggest headache in this whole process.
2. Total what you paid. Add up the checks, cash, and bank transfers you sent each contractor over the year, excluding anything paid by card or app. If the total hits the threshold, that contractor needs a 1099-NEC. This is far easier when you keep a running record of every contractor payment during the year rather than reconstructing it from bank statements at filing time.
3. Fill out the 1099-NEC. Put your business details, the contractor's name and TIN from the W-9, and the total in box 1. If you withheld any federal tax, it goes in box 4.
4. Send the copies. The contractor gets their copy and the IRS gets theirs, both by January 31. If you are filing 10 or more information returns of any kind in total, the IRS now requires you to e-file rather than mail paper.

If a contractor refuses to give you a taxpayer ID, you are required to start backup withholding at 24 percent of their pay and remit it to the IRS, and to file the 1099 regardless of amount. That is a strong incentive to get the W-9 signed before the first check clears.

What happens if you don't file a 1099

The penalty for a late or missing 1099 scales with how late it is, and it applies per form, so a stack of them adds up fast.

The penalty stacks because it applies twice: once for the copy you owe the IRS and once for the copy you owe the contractor. Beyond the flat penalties, failing to issue 1099s is the kind of thing that can put a deduction at risk in an audit, since the IRS may question a contractor-labor expense you never documented on an information return. Filing on time and correctly is much cheaper than the alternative.

If you are on the other side of this, receiving 1099s rather than sending them, our guide to filing 1099 taxes covers how the income and your deductions come together on Schedule C, and the difference between a 1099 and a W-2 explains why contractors owe self-employment tax that employees do not. If most of your income is contract work, self-employed tax filing walks through the whole return.

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

No, not for 2025, unless you applied backup withholding. The reporting threshold for payments made in 2025 is $600 or more per contractor for the year. There is no penalty for issuing one below that amount, and some businesses do so for their own records, but it is not required. For payments made in 2026, the threshold rises to $2,000.

Does an LLC get a 1099?

It depends on how the LLC is taxed. A single-member LLC or an LLC taxed as a partnership gets a 1099-NEC like any individual contractor. An LLC that has elected to be taxed as an S corporation or C corporation does not, because corporations are generally exempt. The W-9 the contractor fills out tells you which box applies, which is why collecting it first matters.

What is the deadline to file a 1099 for a contractor?

January 31. You must furnish the 1099-NEC to the contractor and file it with the IRS by January 31 following the tax year, so 2025 payments are due January 31, 2026. Unlike some other 1099 forms, there is no later IRS deadline for the NEC, and no automatic 30-day extension. Missing the date starts the per-form penalty clock at $60.

Do I need to file a 1099 if I paid a contractor through PayPal or Venmo?

No. Payments made by credit card, debit card, or a third-party payment network such as PayPal or Venmo for business are reported to the IRS by the processor on a 1099-K, not by you on a 1099-NEC. Filing your own 1099 for those payments would double-report the income. Only cash, check, and direct bank transfer payments belong on the 1099-NEC you file.

What if the contractor won't give me their tax ID?

You are required to begin backup withholding at 24 percent of each payment and send it to the IRS, and to file the 1099-NEC regardless of the amount paid. Backup withholding is a strong reason to require a signed W-9 before the first payment, since collecting a taxpayer ID after the fact is difficult once the work is finished.