Who needs a 1099-NEC and when is it due

Most small businesses pay at least a few contractors during the year, whether a web designer, a cleaning service or a bookkeeper. Every January the same question comes up: who needs a 1099-NEC?

This guide gives the general framework. The exact rules and the dollar threshold are in the current IRS instructions.

What is Form 1099-NEC?

Form 1099-NEC is an information return that reports nonemployee compensation. It tells the IRS, and the person you paid, how much you paid them for services during the year.

It applies to payments made in the course of your trade or business. Personal payments, such as hiring someone to paint your own house, are not reported on a 1099-NEC.

Who should receive one?

In general, a business files a 1099-NEC for each individual, partnership or disregarded LLC it paid at least the IRS minimum for services during the year. That includes independent contractors, freelancers and attorneys.

Payments to corporations, including LLCs taxed as corporations, are generally exempt. Attorneys' fees are an important exception and are reported even when the law firm is a corporation. The IRS changed the reporting threshold for payments made after 2025, so confirm the current figure on irs.gov before you prepare forms.

Why collect a Form W-9 first?

Form W-9 gives you the payee's legal name, tax classification and taxpayer identification number. You need all three to decide whether a 1099-NEC is required and to fill it out correctly.

The simplest habit is to request a W-9 before the first payment. Chasing missing forms in January is the most common cause of late or incorrect filings.

When is the 1099-NEC due?

Copies are due to the recipient and to the IRS by January 31 of the year after the payments. When January 31 falls on a weekend or legal holiday, the deadline moves to the next business day.

Plan for the date to hold, and start early. If someone actually works as an employee, their pay belongs on a W-2 instead, which we cover in payroll tax basics for employers.

How do you stay organized all year?

Track contractor payments by payee as they happen, and note how each one was paid. Payments made by credit card or through a third-party payment network are generally reported by the payment processor on Form 1099-K, so they are usually left off the 1099-NEC.

Good books make January simple. Our bookkeeping service keeps contractor payments and W-9s organized during the year, so the forms are ready when the deadline arrives.