If you pay independent contractors, freelancers, or any non-employee who does work for your business — and you've paid them $600 or more in 2025 or $2000 or more in 2026 - you are legally required to issue them a 1099. Get this wrong, and the penalties add up fast. Get it right, and it's actually pretty simple.
Here's everything you need to know, including the difference between the two forms that confuse people every single year.
What Changed: The 1099-NEC Is Now the Main Form
Up until 2020, almost everything went on the 1099-MISC. Then the IRS brought back the 1099-NEC (Non-Employee Compensation) specifically for payments to contractors and freelancers. This is the form most small businesses need.
1099-NEC: Who Gets One?
- Independent contractors, freelancers, and self-employed individuals
- Anyone you paid $600 or more for services during the 2025 calendar year or $2000 or more for services during the 2026 calendar year
- This includes attorneys, even if they're incorporated
- Payments made via check or direct bank transfer - important caveat below
1099-MISC: What's It Still Used For?
The 1099-MISC still exists, but it's now used for things like rent paid to landlords ($600+ in 2025 or $2000+ in 2026), prizes and awards, and certain other income types. Most businesses rarely need it.
The Big Exception: Payment Apps
If you paid someone via PayPal, Venmo Business, Stripe, or any third-party payment network - you typically do NOT issue them a 1099. The payment platform is supposed to handle that reporting via a 1099-K. Note: 1099-K rules have been changing - always check current IRS guidance or ask your bookkeeper.
What You Need to Issue a 1099
- The contractor's legal name
- Their address
- Their Taxpayer Identification Number (Social Security Number or EIN)
This is why collecting a W-9 before you pay anyone is absolutely essential. Do not let a contractor start work without a W-9 in your files.
Deadlines
- January 31: 1099-NEC forms must be provided to recipients AND filed with the IRS
- February 28 (paper) / March 31 (electronic): 1099-MISC deadline to the IRS
Miss these deadlines and the penalties start at $50 per form and go up from there.
The Real Talk
Every year I have clients who come to me in February having paid contractors thousands of dollars and never collected a W-9. We then have to track down tax IDs from people who are suddenly unavailable. Save yourself the headache: W-9 first, payment second. Make it a non-negotiable policy.
If you're not sure who on your payee list needs a 1099 this year, bring your payment records to your bookkeeper right now. January 31st comes fast.
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