Filing 1099 forms is a crucial part of year-end compliance for businesses of all sizes. Whether you’re paying independent contractors, vendors, or other third parties, the IRS requires that you report certain types of payments through 1099 information returns.
If your business has ever wondered “When do I need to file a 1099, and which form should I use?”, this guide covers the basics you need to know.
What Is a 1099 Form?
A 1099 form is an information return used to report non-employee payments made by a business during the tax year. These forms let the IRS track income that isn’t reported on a W-2, such as freelance work, rental income, or payments processed through platforms like PayPal.
Unlike employees, who receive wages reported on Form W-2, independent contractors and other payees receive 1099 forms for the payments they earn.
How do I know which 1099 form to file?
Knowing what form to file is crucial to staying in compliance with the IRS. There are over 20 1099 forms used to report different types of income to the IRS. Below we’ve layed the most popular 1099 used by businesses:
| Forms | What's Reported | Threshold | IRS Due Date |
|---|---|---|---|
|
1099-MISC |
Miscellaneous income such as rents, prizes or awards, payments to an attorney, and other income types. |
$10 in royalties or broker payments in lieu of dividends or tax-exempt interest.
$600 for other income types |
January 31st |
|
1099-NEC |
Non-Employee Compensation such as services paid to an independent contractor, freelancer, or self-employed individual. |
$600 |
January 31st |
|
1099-K |
Payment card or third-party network transactions |
$20,000 |
January 31st |
|
1099-INT |
Interest Payments |
$10 |
January 31st |
Each form serves a specific purpose, so filing the correct one is critical to avoid penalties.
Who Must File a 1099?
All businesses (including LLCs, corporations, nonprofits, and government entities) that makes qualifying payments during the calendar year must file 1099s with the IRS.
You must issue a 1099 if:
- You paid an independent contractor $600 or more for services.
- You paid attorneys $600 or more (even if incorporated).
- You meet other criteria to file a 1099 form.
Step-by-Step 1099 Filing Process
Here’s a simple 5-step process to follow:
- Collect payee information: Request a completed Form W-9 from every contractor/vendor. This provides their legal name, address, and Taxpayer Identification Number (TIN).
Tip: Always collect and verify a W-9 upfront when you onboard a new vendor, contractor, or other recipient. This way you won’t have to worry if you have the correct information during reporting season.
- Track payments throughout the year: Monitor cumulative payments to see if they meet the $600 threshold, or lower in some cases.
- Determine the correct form: Use 1099-NEC for contractors, 1099-MISC for rent or other income, 1099-INT for interest, etc.
- Complete the form: Fill in required information including payments, withholding (if any), and payer/payee details.
- Distribute and file:
- Send the recipient copy to contractors/vendors by January 31.
- File electronically or by paper with the IRS by the same date. Note: Electronic filing is required by the IRS when filing 10+ information returns.
Common Mistakes to Avoid
- Using the wrong form (e.g., reporting contractor payments on 1099-MISC instead of 1099-NEC).
- Forgetting attorney payments: Legal services are always reportable.
- Not accounting for backup withholding: If a payee fails to provide a valid TIN, you must withhold 24% and report it.
- Filing late: Penalties start at $60 per form and can climb to $660 for intentional disregard.
FAQs
Can I file my 1099’s with 1099Pro Cloud?
Yes. 1099Pro Cloud offers complete 1099 filing from start to finish, with eFile, Printing and Mailing services and packages built for businesses of all sizes.
Do I need to send a 1099 to all my contractors?
Yes—if you paid an independent contractor, freelancer, or vendor $600 or more during the year by cash, check, or bank transfer, you must send them a 1099-NEC.
What happens if I don’t file a 1099?
The IRS can issue penalties starting at $60 per form for filing late or incorrectly, and up to $660 per form if you intentionally ignore the rules.
What if I made multiple small payments?
All payments must be added up. If they total $600 or more, you must file.
What if I don’t have a W-9?
You must withhold 24% of payments (backup withholding) until one is provided.
Can I eFile my 1099s instead of mailing paper forms?
Yes—and it’s much faster and easier. The IRS accepts electronic filings, and many services (like 1099Pro Cloud) let you file online and even mail recipient copies for you.