You only have to complete it for business-related payments — not for personal expenses. You don't need to issue a 1099 if you paid someone $600 for personal home repairs, for example.
But you have to provide a 1099 to any business other than a corporation who performs services for your business. For example, the auto mechanic who repairs the company truck; the electrician who came in to add outlets in your office; etc. You must also send a 1099 to the person to whom you pay office or other rent.
You are required to file a federal Nonemployee Compensation (Form 1099-NEC) or a Miscellaneous Information (Form 1099-MISC) for the services performed by the independent contractor. You pay the independent contractor $600 or more, or enter into a contract for $600 or more.
Payments made to corporations, except those made for medical or health care services and attorney fees, are not required to be reported on Form 1099 MISC. Non-Employee payments – Non-employee payments are reported in Box 7 of Form 1099 MISC.
For each person to whom you have paid at least $600 for the following during the year (Form 1099-NEC): Services performed by someone who is not your employee (including parts and materials)
For tax filing purposes, you can provide your house cleaner with a Form 1099 after the year is over if you paid them a total of at least $600.
Service provider's examples: Repairmen (plumbers, electricians, painters, gardeners), attorneys, bookkeepers, landlords, outside/independent, and contractors. An individual, landlord or business that pays interest to an individual or business, excluding corporations, will need to file a 1099. There is not a minimum.
If a business intentionally disregards the requirement to provide a correct Form 1099-NEC or Form 1099-MISC, it's subject to a minimum penalty of $660 per form (tax year 2024) or 10% of the income reported on the form, with no maximum.
The babysitters still must report their income to the IRS. However, you don't need to issue a Form 1099-MISC or withhold taxes. This is because you aren't paying the babysitter in the course of your trade or business. Payments are a personal expense.
Payments that are not reported: Payments to governmental entities. Payments to most corporations for goods and services. However, payments to medical corporations and legal corporations are reported.
Cash payments of $600 or more to an independent contractor should be reported on a 1099 form, regardless of the payment method. Neglecting to issue the appropriate tax forms for cash payments can lead to tax implications and penalties.
Generally, C corporations, S Corporations, and LLCs formed as corporations or S Corps don't need to receive a 1099-NEC or 1099-MISC.
Form 1099 applies only to unincorporated independent contractors, so any payments to corporations are excluded. There are exceptions for corporations that consist of lawyers or doctors who are providing professional services.
Businesses are typically required to issue a 1099 form to a taxpayer (other than a corporation) who has received at least $600 or more in non-employment income during the tax year. A taxpayer might receive a 1099 form if they received dividends which are cash payments paid to investors for owning a company's stock.
This means that for 2023 and prior years, payment apps and online marketplaces are only required to send out Forms 1099-K to taxpayers who receive over $20,000 and have over 200 transactions. For tax year 2024, the IRS plans for a threshold of $5,000 to phase in reporting requirements.
If you pay independent contractors, you may have to file Form 1099-NEC, Nonemployee Compensation, to report payments for services performed for your trade or business.
Don't think that if you didn't receive the form, you won't be required to pay; the IRS will know. Simply report it as miscellaneous income under Schedule C of form 1040. Even if your gains are under $600, you will still have to report it as your personal tax income.
The 1099-NEC is now used to report independent contractor income. But the 1099-MISC form is still around, it's just used to report miscellaneous income such as rent or payments to an attorney. Although the 1099-MISC is still in use, contractor payments made in 2020 and beyond will be reported on the form 1099-NEC.
A 1099 worker is classified as an independent contractor or freelancer, responsible for their taxes, while a W-2 worker is an employee of your business.
General Rules
A Form 1099 needs to be issued and sent to all sole proprietors, independent contractors, partnerships, and LLCs1 that you paid for services exceeding $600, including rent, interest, dividends, and royalties. The IRS has rules to decide if a worker is an employee or a contractor.
Will the IRS catch a missing 1099? The IRS knows about any income that gets reported on a 1099, even if you forgot to include it on your tax return. This is because a business that sends you a Form 1099 also reports the information to the IRS.
The IRS provides the following examples of who should receive 1099s: Anyone who provided professional services, like accountants, engineers, or architects. Non-employee salespersons earning commissions. Independent contractors who get paid for services, goods, or travel or received benefits.
It's often used to describe an independent contractor who is engaged directly by an employer to either provide a service or work on a project. Employers who contract work with this category of consultants or gig workers are required to furnish them with an IRS 1099 form.
As of 2022, the U.S. only requires a 1099 if a vendor was paid more than $600. One caveat to this is that if you hire a company instead of a contractor (for example, a cleaning company rather than an independent contractor), there is no tax reporting requirement.