Guide
When to Issue a 1099 to a Vendor
By Keelstar Team · Updated June 1, 2026
The short answer
Issue Form 1099-NEC to report nonemployee compensation of $600 or more paid in the tax year to a U.S. person who is not an exempt corporation. Use 1099-MISC for other reportable categories such as rents and royalties. The W-9 on file supplies the name and TIN for filing — if it is missing or wrong, you cannot file correctly and may face penalties and backup withholding obligations.
1099-NEC: nonemployee compensation
Form 1099-NEC reports payments to independent contractors, freelancers, and other nonemployees for services. If you paid a U.S. vendor $600 or more in nonemployee compensation during the calendar year, you generally must file 1099-NEC unless an exception applies. This is the form that replaced the old Box 7 reporting on 1099-MISC for most service payments.
1099-MISC: rents, royalties, and other categories
Form 1099-MISC still covers reportable payments such as rents, royalties, prizes and awards, certain medical and health care payments, and other amounts listed in IRS instructions. Know which box your payment type maps to before year-end — AP coding during the year saves January rework.
Who typically does not get a 1099
Common exceptions include payments to C corporations (for many payment types), payments made via credit card or third-party network (reported on 1099-K by the processor), and payments to foreign persons (different forms and withholding rules apply). When in doubt, confirm entity type on the W-9 before assuming exemption.
- C corporations — often exempt from 1099-NEC for services
- Payments to foreign vendors — W-8 series, not 1099-NEC in most cases
- Credit card / PayPal / similar — often reported by payment settlement entity
- Employees — wages on W-2, not 1099
How the W-9 drives filing
The name and TIN on the 1099 must match the payee's W-9 certification. Your filing software pulls from vendor master data that should originate from the W-9 — not from invoice headers or check payee lines typed manually. Gaps in W-9 collection surface in January as non-filings, incorrect filings, or frantic vendor outreach.
Deadlines and penalties
1099-NEC copies generally go to recipients and the IRS by January 31 for the prior tax year. Late or incorrect filings can trigger IRS penalties per return. State filing requirements may apply separately. Build a year-end runbook: W-9 completeness check in November, TIN matching in December, filing in January.
Operational checklist before you file
Reconcile AP payments to 1099 candidates, confirm entity type and exemptions, validate TINs, aggregate by payee, and document vendors below threshold you intentionally excluded. Export evidence showing the W-9 on file for each filed 1099 — auditors connect payments, forms, and certifications.
Frequently asked questions
- Do I send a 1099 to corporations?
- Generally, payments to C corporations are exempt from 1099-NEC reporting. Exceptions exist — including medical and health care payments, attorneys' fees, and certain other categories. S-corps, partnerships, and LLCs taxed as partnerships typically receive 1099s for reportable payments.
- What is the 1099 reporting threshold?
- The common federal threshold is $600 in reportable payments per payee per year. Some categories have different rules — confirm the payment type against current IRS instructions each filing season.
Related guides
Put this into a monitored workflow
W-9 Collector handles this continuously — with reminders and an audit trail.