This hub answers 22 of the most common questions about determining 1099 filing obligations for vendors and contractors. If you want the fuller narrative on why these decisions go wrong at scale, Asure's breakdown of why most growing companies get 1099 obligations wrong covers the workflow failure behind most of these questions. This hub covers the specific answers themselves, organized into five categories: fundamentals, entity types, payment categories, thresholds and deadlines, and workflow.
Fundamentals of What Triggers a 1099
When do I have to issue a 1099 to a vendor?
You issue a 1099-NEC once cumulative payments to a non-corporate vendor for services reach $2,000 in a calendar year, for payments made after December 31, 2025, per the IRS Instructions for Forms 1099-MISC and 1099-NEC. That threshold applies per payee as a running annual total across every payment made to them during the year, regardless of how many separate invoices or projects generated those payments. A vendor paid in three separate installments that together cross $2,000 is reportable for the full-year total, even if no single payment reached the threshold on its own. Starting with the 2027 tax year, the $2,000 figure itself adjusts annually for inflation, so confirm the current year's exact threshold each filing season; the accounts-payable system that tracks vendor spend is the natural place to flag a payee once their year-to-date total crosses the line.
Do you legally have to file a 1099?
Yes, once the payee and payment meet the reporting criteria. The IRS requires 1099 filing for reportable payments made in the course of a trade or business, and the obligation applies regardless of whether the vendor asks for one or expects one. This filing requirement exists so the IRS can cross-match income the payee reports on their own return against what payers report on theirs. Missing a required 1099 exposes you to per-form penalties that scale with how late the correction comes, from $60 per form up to the greater of $690 or 10% of the amount required to be reported if the failure is deemed intentional.
Who is exempt from receiving a 1099?
C-corporations and S-corporations are generally exempt from 1099-NEC reporting, along with government agencies and most organizations described in Internal Revenue Code Section 501(c)(3). The exemption has real, specific exceptions that catch experienced operators off guard: attorneys and law firms are reportable regardless of entity type, and so are medical and health care payments, reported in Box 6 of Form 1099-MISC, made to any provider including incorporated medical practices, per the same IRS instructions that establish the general corporate exemption. A payment to a hospital corporation for contracted physician services is a common example that gets missed because the "corporation is exempt" rule of thumb doesn't hold for this specific payment category.
Which payments are excluded from 1099 reporting?
Wages already reported on a W-2 are excluded from 1099-NEC and 1099-MISC reporting, along with payments for merchandise or goods as distinct from services, and freight charges. Payments made by credit card or through a third-party payment network are also excluded from 1099-NEC and 1099-MISC; those get reported on Form 1099-K by the payment processor, a separate filing obligation belonging to the platform. That 1099-K threshold itself changed under the same 2025 tax law that raised the 1099-NEC/MISC threshold: after a period of scheduled reductions toward $600, the reporting threshold for Form 1099-K reverted to $20,000 in gross payments and more than 200 transactions, retroactive to transactions in 2022 and beyond, per the IRS's 2026 FAQ on the reverted 1099-K threshold. The IRS's electronic filing infrastructure is shifting alongside these threshold changes: Publication 1220, which has historically governed the FIRE system's file specifications, is being retired starting with tax year 2026 filings, with the newer Information Returns Intake System becoming the sole electronic filing platform for filing season 2027, per the IRS's FIRE system page. This is a transition worth tracking specifically for teams that file electronically in-house; a payroll or AP platform that handles the filing mechanics absorbs it automatically.
Entity Types That Get a 1099 and Entity Types That Don't
Do you have to send a 1099 to an LLC?
It depends on the LLC's underlying tax classification. The "LLC" designation is a state-law business structure, and it doesn't by itself indicate how the IRS taxes the entity. Single-member LLCs, disregarded for tax purposes and treated as their owner, and multi-member LLCs taxed as partnerships are both reportable once the threshold is met. LLCs that elected S-corp or C-corp tax treatment fall under the corporate exemption instead. A signed Form W-9 is the only reliable way to confirm which category applies, since a two-member LLC and a single-member LLC that elected S-corp status can look identical from the outside on an invoice or a vendor application.
Do you have to send a 1099-NEC to a corporation?
Generally no. C-corps and S-corps are exempt from 1099-NEC reporting for most services, per the IRS Instructions for Forms 1099-MISC and 1099-NEC. The exception that catches the most companies off guard is legal services: payments to an attorney or law firm are reportable regardless of whether the firm is incorporated, since the exemption from reporting payments to corporations explicitly excludes payments for legal services. Medical and health care payments carry the same carve-out described above, so an incorporated urgent-care clinic paid for contracted services is still reportable even though a similarly incorporated marketing agency generally would not be.
Do you have to send a 1099 to attorneys?
Yes, without exception for entity type or incorporation status. Attorney fees for legal services are reportable on Form 1099-NEC once cumulative payments cross the threshold, and gross proceeds paid to attorneys are separately reportable on Form 1099-MISC, Box 10, even when the payment isn't compensation for the attorney's own services. A settlement disbursed through an attorney's trust account is the clearest example: the full gross proceeds amount is reportable in Box 10 regardless of how the settlement is later split between the client and the firm. This is the single most commonly missed override to the corporate exemption in B2B payables, since legal spend often runs through a general "professional services" vendor code with no flag distinguishing it from a properly exempt corporate consulting fee.
Do you have to send a 1099 to a 501(c)(3) nonprofit?
Generally no. Most nonprofits and tax-exempt organizations are treated similarly to corporations for 1099 reporting on payments for services. Collect and keep a signed W-9 documenting the organization's tax-exempt status anyway, so the exemption is documented on file if the classification is ever questioned during an audit. The one scenario worth watching is a nonprofit acting as a genuine services vendor outside its exempt purpose, since that arrangement can raise separate unrelated-business-income questions for the nonprofit itself, a determination that belongs to the nonprofit's own tax filing rather than to your 1099 decision. A trade association selling paid consulting or research services to member companies is a common example: the association's 501(c) status doesn't change how your payment for those specific services gets treated on your end, so the same W-9-first verification applies as it would for any other vendor.
Do you have to send a 1099 to a government agency?
No. Federal, state, and local government agencies fall outside the 1099 reporting requirement entirely, and the same treatment generally extends to public school districts and other governmental instrumentalities. Document the exemption with a W-9 or an equivalent record the same way you would for any other payee, so your file shows why no 1099 was issued instead of leaving an unexplained gap in your vendor records that an auditor has to ask about later. This category is narrower than it first appears: a quasi-governmental utility, a government-affiliated contractor, or a public-private partnership entity is not automatically covered just because "government" appears somewhere in its name, and each of those needs the same entity-type verification as any other vendor before an exemption gets assumed.
Do you have to send a 1099 to your accountant or CPA?
It depends on how the firm is structured, the same entity-type test that applies to any other vendor. A sole-proprietor bookkeeper or an unincorporated CPA is reportable once the threshold is met; an incorporated CPA firm generally falls under the corporate exemption, unless the specific engagement crosses into legal services, which standard accounting and tax-preparation work typically doesn't. Confirm the entity type through a signed W-9; a firm's name or letterhead is not a reliable indicator of its underlying tax classification, since plenty of incorporated firms keep an individual practitioner's name in the branding. This is one of the more common misclassifications in accounts payable specifically because the vendor relationship often predates any formal onboarding process: a bookkeeper who has invoiced the same way for years may have incorporated at some point without the change ever being reflected in vendor records, so a periodic refresh of W-9s on file, not just a one-time collection at first engagement, catches this drift.
Do you have to send a 1099 to a contractor?
Yes, once cumulative payments for services reach the $2,000 threshold, provided the contractor is genuinely an independent contractor in substance and not an employee. That condition matters more than it looks: the 1099 decision is only as reliable as the underlying worker classification, which the IRS evaluates under its own common-law control test covering behavioral control, financial control, and the relationship of the parties, a separate legal question from the filing decision itself. A worker misclassified as a 1099 contractor when the relationship actually meets the employee test creates exposure well beyond a missing form, including back payroll taxes, penalties, and potential liability under state wage-and-hour law; Form SS-8 is the IRS's own mechanism for requesting a formal determination when the classification is genuinely unclear. Asure's HR Compliance service reviews exactly this kind of borderline worker-classification decision for growth-stage employers, formalizing the control-test analysis before a routine 1099 filing question turns into a misclassification dispute.
Do you have to send a 1099 to a consultant?
Yes, under the same rule that governs any other services vendor: once cumulative payments reach the threshold and the consultant isn't operating as a corporation exempt from reporting. This applies the same way whether the consultant bills a flat monthly retainer or invoices per project, since the threshold tracks cumulative annual payments regardless of the billing structure behind them. Collect the W-9 at the start of the engagement, before the first invoice arrives, so the entity-type question is already answered by the time it matters at year-end.
Payment Categories and Which Payments Are Reportable
Do you have to send a 1099 for advertising payments?
It depends on what the payment is actually for. The word "advertising" on an invoice line item doesn't settle the question by itself. A payment to a media outlet, a programmatic ad platform, or a broadcaster for placement is generally not a reportable service payment. A payment to a freelance marketer, an unincorporated content creator, or a sole-proprietor social media consultant for services is reportable once the threshold is met, the same as any other services vendor, regardless of what the line item on the invoice says. A single influencer or affiliate marketing contract can blend both categories in one payment, a flat placement fee alongside a services component like content creation or campaign management, and the same split-the-invoice approach used for sponsorships applies here: evaluate each component against the entity-type and threshold rules on its own.
Do you have to send a 1099 for a sponsorship?
It depends on what the sponsorship actually buys, and the answer requires separating two components that often get bundled into one invoice. A payment purely for promotional rights or naming recognition, a logo on a step-and-repeat banner or a mention in an event program, is generally not a reportable service payment. A sponsorship arrangement that includes a genuine services component, event staffing, content production, or on-site coordination, is reportable for that services portion if the payee is a non-corporate entity over the threshold. Splitting the invoice into its promotional and services components at the contract stage makes this determination far easier than reconstructing it after the fact.
Do you need to send a 1099 for equipment rental?
Yes, on a different form than most services payments. Rent paid for equipment is reported on Form 1099-MISC, Box 1, a distinct filing from the Form 1099-NEC used for services, and the corporate exemption still applies the same way: rent paid to a corporate lessor is generally exempt, while rent paid to a non-corporate lessor over the threshold is reportable. Rent paid for office space or other real property to a non-corporate landlord is reportable on that same Box 1, which is worth checking alongside equipment leases since both fall under the same form and threshold.
Do you need to send a 1099 for freight charges?
No. Freight charges are specifically excluded from 1099 reporting, regardless of the carrier's entity type or the amount paid. This is one of the cleaner exclusions in the payment-category analysis, since it applies uniformly, without the entity-type test that governs most other payment categories. Where this gets less clean is a combined invoice that bundles freight with a taxable service, a logistics vendor that also handles inventory management or last-mile coordination, for example. In that case, the freight component stays excluded while the services component is evaluated on its own under the normal entity-type and threshold rules, which means a single invoice can be partly reportable and partly not.
Do you need to send a 1099 for professional services?
Yes, for consulting, IT, marketing, and similar professional services paid to a non-corporate provider over the threshold, reported on Form 1099-NEC. Incorporated professional service firms are generally exempt, with the same attorney-fee exception that applies everywhere else in this hub: an incorporated law firm remains reportable for its legal fees, while an incorporated marketing or IT firm generally does not. Payments to a staffing agency for placed workers are typically exempt if the agency itself is incorporated, since the agency is the payee of record on the invoice for its placement services.
Thresholds, Deadlines, and Penalties
What is the $2,000 threshold for 1099 filing, and how is it calculated?
For payments made after December 31, 2025, the reporting threshold for Form 1099-NEC and 1099-MISC is $2,000, the first increase since the $600 figure was set in 1954, per the IRS Instructions for Forms 1099-MISC and 1099-NEC as revised under the One, Big, Beautiful Bill Act. It's calculated cumulatively per payee across the full calendar year as a running total, independent of how many separate invoices or projects generated the payments. A vendor paid $400 in March, $700 in July, and $1,200 in November crosses the $2,000 mark in November, and the obligation applies to the entire year's payments to that vendor, both the amounts paid before the threshold was crossed and after. Starting with the 2027 tax year, the threshold itself will be adjusted annually for inflation, so the exact figure needs to be confirmed each filing season going forward instead of assumed as a fixed constant.
What is the deadline to send 1099s to vendors and file with the IRS?
Recipient copies of Form 1099-NEC are due January 31, and the IRS copy is due on that same date regardless of filing method; there's no paper-versus-electronic split for 1099-NEC the way there is for some other information returns, per the IRS General Instructions for Certain Information Returns. Form 1099-MISC works differently at the IRS filing step: the recipient copy is still due January 31, but the IRS copy is due February 28 if filing on paper or March 31 if filing electronically. Any employer required to file 10 or more information returns in a calendar year, counting every return type together in a single combined total for that filer, must file electronically, effective for returns required to be filed on or after January 1, 2024, per the same general instructions. A genuine hardship can support a 30-day filing extension request via Form 8809, though that extension covers only the IRS filing deadline; the January 31 recipient-copy deadline runs on its own, narrower relief process.
What happens if you don't file a required 1099?
For returns due in 2027 covering 2026 payments, penalties run $60 per form if corrected within 30 days of the due date, $130 per form if corrected after that window, and $340 per form under the general rule if not corrected at all, per IRS Revenue Procedure 2025-32. If the failure is deemed intentional disregard of the filing requirement, the penalty jumps to the greater of $690 or 10% of the amount required to be reported, with no cap, and the IRS weighs factors like whether the filer has a history of compliance and whether the omission looks like an isolated oversight or part of a deliberate, recurring pattern. Multiply any of those per-form figures across a vendor list that has grown from dozens to hundreds, and a single missed classification rule stops being a rounding error.
Workflow and Compliance
How do you determine if a vendor needs a 1099 before you pay them?
Collect a signed Form W-9 before the first payment goes out, as a standard part of vendor onboarding well ahead of any year-end scramble. The W-9 captures the payee's taxpayer identification number, entity type, and tax classification in a single document, which answers every question this hub covers for that specific vendor. A missing or incorrect taxpayer identification number triggers backup withholding at 24% of the payment, per IRS backup withholding guidance, an obligation that stays with the payer until the mismatch gets resolved, whether it's caught at intake through the IRS's TIN Matching program or flagged later by a CP2100 notice. Running new vendors through TIN Matching before the first payment goes out is the difference between a five-minute check and unwinding a full year of backup withholding exposure after a notice eventually arrives. AsureCentral and AsureWorks apply this same capture-it-at-intake discipline on the payroll side, collecting entity and tax classification data from every new hire before the first paycheck runs rather than reconstructing it later; a vendor-onboarding process built on the same principle, entity type confirmed before the first payment rather than after it, is what keeps a growing AP function out of the same year-end scramble.
Do corporations have to send out 1099s to their vendors?
Yes, the payer's own entity type is irrelevant to the obligation. Whether your business is a corporation, an LLC, or a sole proprietorship, your 1099 obligation follows the same rules as every other payer's: the payee's entity type, the payment category, and the cumulative amount paid during the year. A fast-growing incorporated company with hundreds of new non-corporate vendors added over a single year carries the same filing obligation as a five-person sole proprietorship, just at a scale where a manual, spreadsheet-based tracking process breaks down faster.
Learn More
1099 filing decisions come down to the same three variables every time: the payee's entity type, the payment category, and cumulative spend for the year. The edge cases, attorneys, LLCs with corporate elections, advertising versus content creation, medical payments to incorporated providers, are where compliance breaks down as a vendor list grows from dozens to hundreds, and where a single missed classification compounds quietly, invoice after invoice, until a penalty notice or an audit surfaces the full pattern all at once. Asure's full breakdown of why most growing companies get 1099 obligations wrong covers the underlying workflow fix in more depth: capturing entity and classification data once, at intake, rather than reconstructing it under year-end deadline pressure. That intake-first discipline is the same principle AsureCentral and AsureWorks apply to new-hire tax elections and classification data on the payroll side, and it's what Asure's HR Compliance service formalizes for the borderline worker-classification calls this hub keeps coming back to.
