Who to Send a 1099 To and Who Is Exempt

IRS Form 1099 is an information return used to report various types of income other than wages, salaries, and tips, which are reported on Form W-2. Businesses and entities issue these forms to summarize payments made to non-employees throughout the year. Copies are sent to both the recipient and the IRS, promoting tax compliance by tracking income and aiding accurate reporting.

Core Principles of 1099 Reporting

Issuing a 1099 generally applies to payments made in the course of a trade or business, not personal payments. The general threshold for triggering a 1099 reporting requirement is $600 or more paid to a single payee in a calendar year. However, a new law, the One Big Beautiful Bill Act, will increase this threshold to $2,000 for tax year 2026, with inflation adjustments in subsequent years.

These forms are specifically for payments made to non-employees, distinguishing them from W-2 forms used for employees. If federal income tax is withheld from a payment, a 1099 may still be required regardless of the amount. Businesses are responsible for completing the appropriate 1099 form and sending it to the payee, typically by January 31 of the year following the payment.

Payments to Independent Contractors and Gig Workers

Form 1099-NEC reports Nonemployee Compensation paid to individuals like independent contractors, freelancers, and gig workers who provide services to a business. This form applies to payments for professional services, fees, commissions, and awards for services performed by non-employees. Examples of recipients include graphic designers, writers, consultants, and those in transportation or delivery services.

If a business pays $600 or more for services rendered by a non-employee in a calendar year, it must generally issue a Form 1099-NEC. The distinction between an employee and independent contractor is crucial; employees receive a W-2 with withheld taxes, while contractors handle their own self-employment taxes. Businesses should obtain a completed Form W-9 from contractors to gather necessary taxpayer identification information for reporting.

Other Reportable Payments

Beyond nonemployee compensation, various other payments require reporting on different 1099 forms. Form 1099-MISC, Miscellaneous Information, reports a range of payments not covered by other specific 1099 forms. This form is used for payments of at least $600 for items such as rents, prizes, and awards, or medical and health care payments. For instance, if a commercial tenant pays $600 or more in rent to a landlord, the tenant generally must issue a Form 1099-MISC.

Payments to attorneys are also reportable. Depending on the nature of the payment, either Form 1099-NEC or Form 1099-MISC may be used. Payments for legal services typically go on Form 1099-NEC, while gross proceeds paid to an attorney in a settlement are reported on Form 1099-MISC. For interest income, financial institutions issue Form 1099-INT when $10 or more in interest is paid to an individual in a calendar year. Dividends and other distributions from investments exceeding $10 are reported on Form 1099-DIV.

When a 1099 Is Not Required

Certain payments are exempt from 1099 reporting requirements, even if they meet the general threshold. Payments made to corporations are typically exempt from 1099-NEC and 1099-MISC reporting, though there are exceptions. Exceptions include payments to attorneys and certain medical or healthcare payments made to corporations.

Payments for merchandise, freight, or storage are also generally not subject to 1099 reporting. Payments to tax-exempt organizations are another common exception. Finally, payments processed through credit cards or third-party payment networks, such as online marketplaces or payment apps, are typically reported by the payment processor on Form 1099-K. The threshold for Form 1099-K is $2,500 for 2025.