Quick overview

The IRS requires Form 1099 when businesses or individuals make certain payments to non-employees, investors, or other payees that meet reporting thresholds. Most commonly this means issuing a 1099-NEC for nonemployee compensation and a 1099-MISC for miscellaneous payments when the cumulative amount to a single payee crosses the $600 mark in a calendar year. Other forms (1099-INT, 1099-DIV) have lower thresholds. Proper 1099 handling reduces audit risk and helps recipients reconcile income with their tax returns (IRS, “Filing Requirements for Form 1099”).

(Background note from the author: In my 15 years advising small businesses and freelancers, missed 1099s are a top driver of IRS information-mismatch notices.)

Key thresholds that trigger 1099 reporting

  • 1099-NEC (Nonemployee Compensation): issue when you pay $600 or more to an individual or unincorporated business for services during the year. The $600 rule applies to a single payer–payee relationship over the calendar year. (IRS guidance: Filing Requirements for Form 1099)

  • 1099-MISC (Miscellaneous Income): issue for many types of payments such as rents, prizes and awards, and other income payments when total payments to the recipient are $600 or more in the year. Some boxes on Form 1099-MISC have different thresholds (review the form instructions for specifics). (IRS, About Form 1099-MISC)

  • 1099-INT and 1099-DIV (Interest and Dividends): issuers generally report when interest or dividends paid to a recipient are $10 or more during the year. Thresholds and exceptions can vary by instrument. (IRS, About Form 1099-INT; About Form 1099-DIV)

  • Other 1099 variants: specialized 1099s (1099-B for broker transactions, 1099-S for real estate closings, 1099-R for distributions from pensions/retirement) have their own rules and thresholds—check the IRS instructions that apply to each form.

Note: These thresholds represent the most common reporting triggers. Always check the specific form instructions for exceptions and different reporting boxes.

Common exceptions and special cases

  • Payments to corporations: generally do not require a 1099 (including most C and S corporations), except for specific payments such as attorney fees or medical and healthcare payments, which still require reporting regardless of corporate status. Always confirm the payee’s business classification using Form W-9. See IRS instructions for exceptions.

  • Backup withholding situations: if a payee fails to provide a correct TIN or is subject to backup withholding, you must withhold taxes and still file the appropriate 1099 reporting the payments and withheld amount.

  • Payments to tax-exempt entities: many payments to tax-exempt organizations do not trigger a 1099, but there are exceptions based on payment type. Review each situation against the IRS instructions.

  • Third-party network transactions (payment apps, credit card processors): payments processed through third-party settlement organizations (TPSOs) are reported on Form 1099-K by the processor, not by the payer, once thresholds for 1099-K are met. Rules for 1099-K have changed in recent years—confirm current thresholds and responsibilities with the processor and IRS guidance.

Who must file and who receives 1099s

  • Payers required to file: any business or person who makes reportable payments in the course of a trade or business must file the appropriate 1099. This includes sole proprietors, partnerships, corporations (in certain payments), nonprofit organizations, and government entities making reportable payments.

  • Payees who receive 1099s: independent contractors, freelancers, landlords, attorneys, investors, and others who receive reportable payments will receive copies of the 1099 and must report that income on their tax returns.

  • Employee wages are not reported on Form 1099; wages belong on Form W-2 and are subject to payroll taxes and withholding. Misclassifying employees as contractors to avoid payroll taxes is a common and risky mistake. For guidance on proper worker classification see our W-2 vs 1099 article.

Deadlines and filing methods (2025 rules)

  • 1099-NEC: file with the IRS and furnish to recipients by January 31 (calendar-year filing). If January 31 falls on a weekend or holiday, the due date shifts to the next business day. (IRS, Filing Requirements for Form 1099)

  • 1099-MISC, 1099-INT, 1099-DIV (recipient copies): furnish recipient copies by January 31. Paper filing to the IRS is typically due February 28; electronic filing due March 31. Confirm current-year deadlines on the IRS website each filing season.

  • Electronic filing requirement: businesses filing 250 or more 1099s must file electronically, though the IRS increasingly encourages/mandates e-filing even for smaller filers. Filing through the Social Security Administration or IRS e-file system or using an authorized vendor is common.

  • Penalties: late filing, filing incorrect forms, or failure to file may result in penalties that scale by lateness and the size of the business. Intentional disregard carries substantially higher penalties. If you discover an omission, correct and file as soon as possible to reduce exposure (IRS penalty guidance).

Practical steps to comply (my recommended workflow)

  1. Collect Form W-9 before payment: always obtain a completed Form W-9 from vendors and contractors before the first payment. A correct W-9 gives the legal name, business structure, and TIN you need to report accurately. (See our guide: Form W-9)

  2. Track payments in real time: set up an accounts-payable category for contractor and miscellaneous payments so you can sum year-to-date totals per payee easily.

  3. Confirm entity type: use the W-9 to verify whether the payee is a corporation, LLC, or individual. That classification affects whether a 1099 is required.

  4. Handle backup withholding promptly: if a W-9 is missing or the TIN is incorrect, begin backup withholding if required and document your attempts to obtain correct information.

  5. Prepare early and file electronically: run a report in December and reconcile in January; furnish recipient copies by Jan 31 and e-file with the IRS if required.

  6. Keep supporting documentation: retain contracts, invoices, W-9s, and payment records for at least three years (longer if you anticipate audits or unusual transactions).

Real-world examples and common pitfalls

  • Freelancer example: a web developer receives $3,000 from Client A during the year. Client A must issue a 1099-NEC because the payments are for services and exceed $600. The freelancer should receive the form by Jan 31 and report that income on Schedule C.

  • Rental example: a property owner pays a contractor $2,500 for repairs and rents an apartment to a tenant who pays rent exceeding $600. The rental owner may need to issue a 1099-MISC for certain payments they make (or receive) depending on context. Rental receipts are generally reported by the recipient as income, but the payer’s reporting obligations depend on payment type.

Common mistakes I see in practice:

  • Not collecting a W-9 or collecting it late.
  • Treating corporations like they never need a 1099 (attorney and medical payments are exceptions).
  • Waiting until February or March to reconcile year-end payments, which leads to rushed or incorrect filings.

Correcting mistakes and handling mismatches

If a recipient receives a notice from the IRS about a mismatch, start by reconciling your records to the issued 1099. If you discover an error on a submitted 1099, file a corrected 1099 as soon as possible following IRS correction procedures. For persistent mismatches, document your reconciliation steps and reach out to the recipient to confirm their reporting. See our guide on common 1099 errors for step-by-step correction advice.

Checklist for payers (quick reference)

  • Request W-9 before first payment. (Internal link: Form W-9)
  • Track payments by payee throughout the year.
  • Verify payee classification (individual, LLC, corporation).
  • Determine if payment type is reportable and whether exceptions apply.
  • Furnish recipient copies by Jan 31; file with IRS by the required due date.
  • Correct errors promptly and keep records of corrections.

Related FinHelp resources

Authoritative sources

Professional disclaimer

This article is an educational guide and not personalized tax advice. Rules and filing deadlines can change annually; consult a tax professional or the IRS website for guidance tailored to your facts and the current tax year.