Who gets a 1099? As you begin tax season prep, you likely already know that you’ll need to issue 1099s to independent contractors. However, there are a few other professionals and entities that also get a 1099 that you may not know about.
In this article:
IN THIS ARTICLE:
- You must issue a Form 1099-NEC to non-employee service providers who are not incorporated, like independent contractors and attorneys.
- If a service provider is incorporated as a C-Corp or S-Corp, you are not required to issue a Form 1099-NEC.
- Form 1099-MISC is used to cover a smorgasbord of other payments.
- The 1099 filing deadline is January 31. Filers who have more than 10 information returns (like Form 1099) to report in a tax year must file these online.
There are two types of 1099 forms:
- Form 1099-NEC
- Form 1099-MISC
Below, we’ll cover who gets a 1099, breaking it down by form type.
Who gets Form 1099-NEC?
Non-employee contractors
Non-employee contractors are the most well-known recipients of 1099s. (Important: Here’s how to properly classify an independent contractor vs. an employee.)
If you made payments over $600 annually to any non-employee contractor, you must issue this person a Form 1099-NEC.
If, for example, you hired a construction-related contractor: payments made for parts and materials do count toward that $600 threshold — not just the payment for services alone.
We recommend requesting a W9 from your contractor at the start of the contract; keep this on file for when it’s time to issue 1099s. The W9 will inform you whether the contractor is a sole proprietor, partnership, or corporation. You will issue 1099s to contractors classified as sole proprietors, LLCs, or partnerships.
Haven’t received a completed Form W9 from your contractor? In this case, you are safest to go ahead and issue a Form 1099 to them.
If the payments are made to a business organized as S-Corp or C-Corp, you are NOT required to issue Form 1099-NEC.
Law firms
Although a law firm may be incorporated, payments made for services to attorneys, firms, or other providers of legal services DO require issuing a Form 1099-NEC.
Keep in mind: this is ONLY for payments made for services. If, for example, you pay out gross proceeds to an attorney in a settlement agreement, you would issue a Form 1099-MISC for that payment.
Real estate agents
If you paid commission directly to an independent contractor real estate agent, that is viewed as non-employee compensation, so you’ll be required to issue a Form 1099-NEC to the realtor.
Cash Payments Made for Fish
This 1099-NEC requirement feels like a fish out of water, doesn’t it? (Did that pun flop?)
We’d imagine that to the majority of our readers, the IRS stipulation of “cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish” likely will not apply to your tax scenario.
But who knows… maybe your office added an aquarium to the atrium! And you just so happened to purchase those fish in cash directly from the source. In which case, issuing a Form 1099-NEC is required if you paid more than $600.
Who does NOT require Form 1099-NEC?
Payments made for services to businesses incorporated as a C-Corp or S-Corp do NOT require you to file Form 1099-NEC. Best practice is to have a Form W9 completed by your vendor or subcontractor in your files. This serves as proof that you did/did not file 1099s based on the information you received from the vendor or subcontractor.
Additionally, if you paid less than $600 for the person or unincorporated business, you are not required to issue a 1099.
Who gets Form 1099-MISC?
Form 1099-MISC must be used if your business paid made more than $600 to an individual for:
- Rents
- Prizes and awards
- Other income payments
- Generally, the cash paid from a notional principal contract to an individual, partnership, or estate
- Any fishing boat proceeds
- Medical and health care payments
- Crop insurance proceeds
- Gross proceeds paid to an attorney (not to be confused with attorney services you pay for, which falls under Form 1099-NEC)
- Section 409A deferrals
- Nonqualified deferred compensation
1099 Filing Reminders
1099 Filing Deadline
The deadline for providing 1099s is January 31. This date remains the same year to year.
Filing Your Returns
Starting tax year 2023, if you have 10 or more information returns, you must file them online. Information returns include (but are not limited to) Forms W-2, 1098 series, 1099 series, Affordable Care Act (ACA) Forms 1094-C, 1095-B, and 1095-C.
For example, if you must issue four W-2s and six Form 1099-NEC and/or 1099-MISC, the total combined information returns are 10; therefore you must file your returns with the IRS online.
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