What is a 1099 Form?

by | Jan 7, 2026 | Financial Literacy

what is a 1099 form

What Is a 1099 Form?

A 1099 form is a tax form used to report income that isn’t paid as wages, salary, or tips. Small businesses use 1099s to report certain payments made to vendors, contractors, and service providers throughout the year.

These forms help the IRS track income that may not have taxes withheld at the time of payment.

Common Types of 1099 Forms Small Businesses Use

There are several types of 1099 forms, but most small businesses only need to be familiar with two:

1099-NEC (Nonemployee Compensation)
This form is used to report payments made to independent contractors, freelancers, and other non-employees for services performed. As of 2020, all nonemployee compensation is reported on Form 1099-NEC.

1099-MISC
This form is used to report other types of income, such as rent payments, prizes and awards, and certain miscellaneous payments that don’t qualify as nonemployee compensation.

1099 misc

For most businesses, these are the only 1099 forms they will need to issue.

What Information Is Needed to Complete a 1099?

To prepare a 1099 form, you’ll need:

  • The recipient’s legal name and address
  • The recipient’s Taxpayer Identification Number (TIN)
  • Your business name, address, and TIN
  • The total amount paid during the tax year
  • The correct income category (reported in the appropriate box on the form)
  • Any backup withholding amounts, if applicable

Once completed, you must:

  • Provide a copy to the recipient, and
  • File a copy with the IRS

The deadline for both is January 31.

Accuracy matters. The IRS uses this information to match reported income, and errors can result in penalties or notices for both you and the recipient. If you’re unsure how to complete a 1099, working with a tax professional can help prevent issues.

Who Do You Need to Send a 1099 To?

As a small business owner, you may need to issue 1099 forms to certain vendors you paid during the year. The most common situations include:

Independent Contractors and Freelancers
If you paid $600 or more for services to an individual or qualifying business, you’ll typically need to issue a 1099-NEC. This includes consultants, designers, writers, accountants, and other service providers.

Rent Payments
If you paid $600 or more in rent, you may need to issue a 1099-MISC. This can include office space or equipment rentals. Payments made to corporations generally do not require a 1099.

Attorney or Legal Fees
Payments of $600 or more to attorneys must be reported on a 1099-NEC, even if the attorney operates as a corporation.

Non-Corporate Entities
In general, 1099s are required for payments made to sole proprietors, partnerships, and many LLCs. Most corporations are exempt, with exceptions for legal and medical services.

Other Miscellaneous Payments
Prizes, awards, and certain other payments totaling $600 or more are reported on 1099-MISC.

Important 1099 Rules Many Business Owners Miss

  • 1099s apply to services, not products
  • Payments made by credit card, debit card, or third-party processors (such as PayPal, Stripe, or Square) are not reported on a 1099-NEC or 1099-MISC
    • These payments are reported by the payment processor on Form 1099-K
  • You should collect a completed W-9 from vendors before issuing payments

1099 Filing Checklist for Small Business Owners

Use this checklist to stay organized and avoid last-minute stress:

☐ Review vendor payments for the year
☐ Identify vendors paid $600 or more for services
☐ Confirm payment method (cash, check, ACH vs. credit card)
☐ Collect or verify W-9 forms for applicable vendors
☐ Prepare 1099-NEC and 1099-MISC forms
☐ Send copies to recipients by January 31
☐ File copies with the IRS by January 31
☐ Keep copies with your tax records

1099 requirements can feel straightforward until you run into exceptions and edge cases. When you’re unsure whether a 1099 is required, checking IRS guidance or getting help from a tax professional can save time—and prevent costly mistakes.

NOTE: This information applies to 2025 1099 filings (for payments made in 2024). Beginning with 2026 filings, the IRS is increasing the reporting threshold for Form 1099-K to $2,000.

Where do I get these forms?

Don’t worry – I help my clients with this type of filing all the time, and I’ve gotcha covered.  We offer consultations to help you determine who you should send 1099s. Call or contact us for a consultation.

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