Do I Need to Issue a Form 1099 to My Contractors?

A business that pays independent contractors may be required to issue Form 1099-NEC.

Form 1099-NEC is generally used to report payments for services performed by someone who is not treated as an employee.

A business generally must issue Form 1099-NEC when all the following conditions are met:

• The payment was made to someone who is not an employee.
• The payment was for services performed in the course of the payer's trade or business.
• The payment was made to an individual, partnership, estate, or another reportable recipient.
• Total reportable payments reached the applicable annual threshold.

For payments made during 2026, the general reporting threshold is $2,000. The threshold was $600 for payments made before 2026 and is scheduled to be adjusted for inflation after 2026.

Form 1099-NEC may also be required when federal income tax was withheld under the backup-withholding rules, even when the payment was below the normal reporting threshold.

Businesses should request a completed Form W-9 before the contractor begins working or before payment is made.

Form W-9 provides the contractor's:

• Legal name
• Business name, if applicable
• Federal tax classification
• Address
• Taxpayer identification number

The business keeps Form W-9 in its records.

Yes. The method used to pay the contractor can affect who has the reporting responsibility.

Payments made by check, cash, ACH, or direct bank transfer may need to be reported by the business on Form 1099-NEC.

Payments made by credit card, payment card, or certain third-party payment networks are generally reportable by the payment processor on Form 1099-K. The business generally should not include those same payments on Form 1099-NEC.

Many payments made to corporations are exempt from Form 1099-NEC reporting. However, important exceptions apply.

For example, payments for legal services may be reportable even when the law firm operates as a corporation. The contractor's Form W-9 helps the business determine the contractor's federal tax classification.

Form 1099-NEC is generally due to both the contractor and the IRS by January 31 following the year of payment. When the due date falls on a weekend or legal holiday, the deadline generally moves to the next business day.

Businesses should review contractor payments and make sure all the required Forms W-9 are on file. Missing taxpayer identification numbers and worker-classification questions are easier to address before the filing deadline.

Best practice is to keep collecting W-9s from everyone regardless. You can't know in January who crosses $2,000 by December, and backup-withholding exposure doesn't wait.