Every startup that pays contractors files information returns in January, and every year some are filed late or not at all because W-9s were never collected. The rules also changed: for payments made after 2025, the reporting threshold for most 1099-NEC and 1099-MISC payments rises from $600 to $2,000.
Who gets a form
| Payee | Usually reportable? |
|---|---|
| Individual contractors and single-member LLCs (disregarded) | Yes, on 1099-NEC for services |
| Partnerships and multi-member LLCs taxed as partnerships | Yes |
| Corporations (C or S) | Generally no |
| Attorneys, for legal services | Yes, even if a corporation |
| Landlords for rent | Yes, on 1099-MISC |
| Anyone paid by card or a payment network | No; reported on 1099-K by the payment processor |
The threshold
- Payments made in 2025: the $600 threshold applies.
- Payments made after December 31, 2025: the threshold for most 1099-NEC and 1099-MISC reporting rises to $2,000, with inflation adjustments expected beginning in 2027.
The change affects reporting only. Contractors still owe tax on everything they are paid.
The deadline
Form 1099-NEC is due to both the contractor and the IRS by January 31 (the next business day when it falls on a weekend). There is no automatic extension for 1099-NEC. Filing electronically is required once you file 10 or more information returns in total.
The W-9 habit
Collect a Form W-9 before the first payment, not in January. It gives you the legal name, tax classification and taxpayer identification number. Without a valid TIN you may be required to apply backup withholding.
Building it into the books
- Tag 1099-eligible vendors in the accounting system when you set them up.
- Pay contractors by ACH or check when you want clean 1099 tracking; card payments shift reporting to the processor.
- Run a 1099 review in December so W-9 gaps are fixed before the deadline.
We track eligibility as vendors are added, collect W-9s at onboarding and file the forms every January as part of Tax Prep.
A December routine that prevents January problems
- Run a vendor payment report for the year, by payee.
- Filter to payees paid by check or ACH for services, rent or other reportable categories.
- Exclude corporations (except attorneys) and payments made by card.
- Compare the list to W-9s on file and request any that are missing.
- Confirm legal names and TINs match; mismatches lead to IRS notices.
- Prepare and review the forms in early January, then file and furnish copies by the deadline.
NEC or MISC
| Payment | Form |
|---|---|
| Fees to contractors for services | 1099-NEC |
| Attorney fees for legal services | 1099-NEC |
| Rent | 1099-MISC |
| Gross proceeds paid to attorneys (for example, settlements) | 1099-MISC |
| Prizes, awards and certain other income | 1099-MISC |
State filing
Many states require their own copy of 1099 information, either through the federal Combined Federal/State Filing Program or directly with the state. Some states also require withholding or registration for nonresident contractors. Check the states where your contractors live and work.
International contractors
Foreign individuals performing services entirely outside the United States generally do not receive a 1099. Collect a Form W-8BEN instead and keep it on file to document foreign status.
Penalties
Late or incorrect information returns carry per-form penalties that increase with how late they are, and failing to furnish copies to payees is a separate penalty. A simple vendor-setup habit avoids nearly all of it.
Sources
Questions founders ask
Do we issue 1099s to vendors paid by credit card?
Generally no. Payments made by card or through payment networks are reported by the payment settlement entity on Form 1099-K, not by you on a 1099-NEC.
Do corporations get 1099s?
Generally no, with exceptions, most notably payments to attorneys, which are reportable even to corporations.
