Do I Need to File 1099 Forms? A Small Business Quiz and Complete Guide
The IRS requires businesses to report certain payments to non-employees using 1099 forms. Missing these filings can result in penalties ranging from $60 to $680 per form. Yet many small business owners remain confused about when 1099s are actually required.
This guide walks you through the key questions to determine your 1099 filing obligations, explains the differences between form types, and covers the thresholds and deadlines for 2026.
The Quick Quiz: Do You Need to File 1099s?
Answer these five questions to determine if you have 1099 filing obligations:
Question 1: Did you pay anyone who isn't your employee for services?
If you paid independent contractors, freelancers, consultants, or other non-employees for services rendered to your business, you likely have 1099 obligations. This includes payments for professional services like accounting, legal work, design, marketing, repairs, or any other service.
Question 2: Did you pay $600 or more to any single payee during the year?
For tax year 2025 (filed in 2026), the threshold is $600. If you paid a contractor less than this amount, no 1099 is required for that payee. Note: Beginning with tax year 2026, this threshold increases to $2,000.
Question 3: Did you pay by check, cash, ACH, or wire transfer?
Payments made via credit card, debit card, or third-party payment networks like PayPal or Venmo (when using business accounts) are reported by the payment processor on Form 1099-K. You don't need to issue a 1099-NEC for these payments.
Question 4: Did you pay a corporation?
Payments to C corporations and S corporations generally don't require 1099 reporting. However, there are two major exceptions: payments to attorneys (regardless of corporate status) and payments for medical or healthcare services.
Question 5: Are you operating a trade or business?
Personal payments don't require 1099 reporting. If you paid someone to do work on your personal residence as an individual homeowner, no 1099 is needed. But if you're a landlord managing rental properties as a business activity, those contractor payments do require 1099s.
Scoring:
- If you answered YES to questions 1, 2, 3, and 5, and NO to question 4: You need to file 1099 forms.
- If you answered NO to any of questions 1, 2, or 5: You likely don't need to file.
- If you answered YES to question 4 (paid a corporation): No 1099 required unless it's for legal or medical services.
Understanding the Different 1099 Forms
Form 1099-NEC (Nonemployee Compensation)
This is the most common form for small businesses. Use 1099-NEC to report:
- Payments to independent contractors and freelancers
- Professional service fees (accountants, architects, engineers, consultants)
- Attorney fees
- Commissions to non-employees
- Fee-splitting or referral fees between professionals
The key distinction: 1099-NEC covers payments for services that are subject to self-employment tax.
Form 1099-MISC (Miscellaneous)
Use 1099-MISC for other types of payments that aren't for services:
- Rent payments for office space, equipment, or property
- Prizes and awards
- Legal settlements and damages
- Royalty payments
- Medical and healthcare payments
Form 1099-K
This form is issued by payment processors (credit card companies, PayPal, Stripe) to report payments received through their platforms. As a business making payments, you don't file this form—the payment processor does.
2026 Filing Thresholds and Changes
Current Thresholds (Tax Year 2025, Filed in 2026)
| Form Type | Minimum Threshold |
|---|---|
| 1099-NEC | $600 |
| 1099-MISC (most boxes) | $600 |
| 1099-MISC (royalties) | $10 |
| 1099-K | $20,000 AND 200+ transactions |
New Thresholds Starting Tax Year 2026
Beginning with tax year 2026 (filed in early 2027), the IRS is raising the reporting threshold for both Form 1099-NEC and Form 1099-MISC from $600 to $2,000. This threshold will then be indexed for inflation in future years.
This means contractors receiving between $600 and $1,999 annually will no longer receive 1099 forms starting in 2026.
Key Deadlines for 2026
Since January 31, 2026 falls on a Saturday, the deadlines shift to the next business day:
| Action | Deadline |
|---|---|
| Furnish 1099-NEC to recipients | February 2, 2026 |
| File 1099-NEC with IRS (paper or electronic) | February 2, 2026 |
| Furnish 1099-MISC to recipients | February 2, 2026 |
| File 1099-MISC with IRS (paper) | March 2, 2026 |
| File 1099-MISC with IRS (electronic) | March 31, 2026 |
Common Scenarios Explained
Scenario 1: Freelance Designer
You hired a freelance graphic designer who invoices your LLC $800 for logo design work. You paid by business check.
Result: File Form 1099-NEC. The payment exceeds $600, was for services, and wasn't made to a corporation.
Scenario 2: Office Rent
Your business pays $1,500 monthly to a landlord (individual, not a corporation) for office space.
Result: File Form 1099-MISC. Report total annual rent ($18,000) in Box 1. Rent payments go on 1099-MISC, not 1099-NEC.
Scenario 3: Credit Card Payments to Contractor
You paid a web developer $5,000 over the year, but all payments were made via credit card.
Result: No 1099 required from you. The credit card processor will issue a 1099-K to the contractor.
Scenario 4: Payment to Attorney's Firm (S-Corp)
You paid $3,000 in legal fees to a law firm structured as an S corporation.
Result: File Form 1099-NEC. Attorney fees are always reportable regardless of corporate status.
Scenario 5: Landlord Paying Plumber
You own three rental properties and paid a plumber $750 for repairs across your properties during the year.
Result: File Form 1099-NEC. As a landlord operating a rental business, you must report contractor payments over $600. This also helps establish your rental activity as a business rather than an investment for tax purposes.
Scenario 6: Personal Home Repair
You paid a handyman $900 to fix your personal residence (not a rental property).
Result: No 1099 required. Personal payments outside of trade or business don't require 1099 reporting.
Penalties for Not Filing
The IRS takes 1099 compliance seriously. Penalties increase based on how late you file:
| Filing Status | Penalty Per Form |
|---|---|
| Up to 30 days late | $60 |
| 31 days late through August 1 | $130 |
| After August 1 | $340 |
| Intentional disregard | $680 (no maximum) |
Small businesses (gross receipts of $5 million or less) face lower maximum penalties than larger businesses. However, for intentional disregard—deliberately ignoring your filing obligations—there's no maximum limit on penalties.
The W-9 Collection Process
Before you can file accurate 1099s, you need taxpayer information from your payees. Form W-9 collects this data.
Best Practices for W-9 Collection
Collect early: Request W-9s before making the first payment to any contractor. Include it in your contractor onboarding process.
Verify information: Use IRS TIN matching to verify that the taxpayer identification number matches the name provided. Mismatches can trigger IRS notices.
Update regularly: Request updated W-9s every year or two, especially if a contractor changes their business structure, name, or address.
Handle refusals properly: If a contractor refuses to provide their TIN, you're required to withhold 24% of payments for federal tax (backup withholding) and note the refusal when filing.
Keep records: Maintain W-9s on file for at least four years after issuing the last related 1099.
E-Filing Requirements
If you're filing 10 or more information returns in total during the calendar year (including W-2s and all 1099 types combined), you must file electronically. Paper filing when e-filing is required can trigger additional penalties.
You can request a hardship waiver using Form 8508 if electronic filing is genuinely not possible for your business.
Exceptions to Remember
Corporations: Generally exempt from 1099 reporting, except for:
- Attorney fees (always report)
- Medical and healthcare payments (always report)
Foreign workers: If you pay a non-US citizen who performs all work remotely from outside the United States, no 1099 is required. However, if any work is performed within the US, 1099 reporting applies.
Merchandise only: Payments for goods without services don't require 1099 reporting. If you're buying products from a supplier with no service component, no 1099 is needed.
Credit card and payment network transactions: The payment processor handles reporting via 1099-K.
Checklist for 1099 Season
Use this checklist to prepare for 1099 filing:
- Review all vendor payments from the past year
- Identify payments over $600 (or $2,000 for tax year 2026 and beyond)
- Confirm you have current W-9s for all reportable payees
- Verify TINs match payee names using IRS TIN matching
- Determine correct form type (1099-NEC vs 1099-MISC)
- Exclude payments made by credit card or payment network
- Exclude payments to corporations (except attorneys and medical providers)
- Generate and send recipient copies by deadline
- File with IRS by deadline (electronically if 10+ returns)
- Keep copies of all forms and W-9s for at least four years
Simplify Your 1099 Tracking
Proper bookkeeping throughout the year makes 1099 season straightforward. When every contractor payment is categorized correctly with vendor details attached, generating 1099s becomes a simple report rather than a scramble.
Beancount.io provides plain-text accounting that gives you complete visibility into your financial data. Track contractor payments, categorize expenses, and maintain the records you need for accurate 1099 filing—all in a format you can version control and verify. Get started free and take control of your business finances.
