Who Should I Send a 1099 To? A Plain-English Guide for New Business Owners (2026 Rules)

Just starting a business and wondering who gets a Form 1099? The short answer is: not everyone. Here is a simple way to decide, a real-life example, and the tax code citations behind each rule.

The Short Answer

No, you do not send a 1099 to everyone you pay. In general, you send a Form 1099 to a person you paid $2,000 or more during the year, for services or rent, in the course of your business, if that person is not a corporation. For payments made in 2026, the dollar threshold is $2,000. It used to be $600 (IRC §6041(a), as amended by Pub. L. 119-21, §70433).

Below is a four-question test, a worked example, and a step-by-step plan for your first 1099 season.

Four Questions to Ask About Every Payment

1. Was it a business payment? Personal payments are not reportable. The reporting rule applies only to payments made in the course of a trade or business (IRC §6041(a); Treas. Reg. §1.6041-1(b); Instructions for Forms 1099-MISC and 1099-NEC).

2. What was the payment for? Payments for services, and for rent, are the ones that usually need a form (IRC §6041(a); IRC §6041A(a)). Payments for merchandise, telephone, freight, storage and similar items are generally not reportable. If one payment mixes goods and services, the part paid for services may still be reportable (Instructions for Forms 1099-MISC and 1099-NEC).

3. How much did you pay in total? The test is $2,000 or more to the same person in the calendar year, counting payments of the same type (IRC §6041(a); IRC §6041A(a)). Add up all payments for the year, not just the biggest one or each invoice on its own.

4. Who received the money? Individuals, sole proprietors and partnerships generally get a 1099. Corporations generally do not, but there are exceptions. The two you will meet most often are attorneys, whose legal fees are reported even if the law firm is a corporation, and medical and health care providers. There are a few rarer exceptions too (Treas. Reg. §1.6041-3(p)(1); Instructions for Forms 1099-MISC and 1099-NEC).

An LLC is not its own tax category. What matters is how the LLC is taxed.

• An LLC taxed as a partnership is reported as a partnership.
• An LLC taxed as a C or S corporation is generally treated like a corporation, so it generally does not get a 1099, subject to the exceptions above.
• A single-member LLC that is ignored for tax purposes is reported under the owner's name and taxpayer identification number (TIN), with the LLC's name on the second name line (Instructions for Forms 1099-MISC and 1099-NEC).

The Form W-9 your vendor fills out tells you which one applies.

Two other situations usually do not need a 1099 from you. Employees get a Form W-2, not a 1099 (Instructions for Forms 1099-MISC and 1099-NEC). And payments made by credit card or debit card are reported by the card company on Form 1099-K, not by you (IRC §6050W; Instructions for Forms 1099-MISC and 1099-NEC).

Form 1099-NEC or Form 1099-MISC?

(IRC §§6041, 6041A, 6045(f), 6050N; Instructions for Forms 1099-MISC and 1099-NEC)

Example: Maria's Bakery

Maria opened a bakery in 2026. Here is who gets a 1099 from her.

Two notes on the table. Royalties are reportable at just $10, not $2,000 (IRC §6050N). And money you pay to an attorney that is not a fee, such as settlement proceeds, is a separate category reported on Form 1099-MISC with a $600 threshold (IRC §6045(f); Treas. Reg. §1.6041-1(a)(1)(iii)).

What Changed: $2,000 Instead of $600

For many years the threshold was $600. For payments made after December 31, 2025, it is $2,000 (IRC §6041(a); Pub. L. 119-21, §70433). The same dollar amount applies to payments for services under IRC §6041A(a). Starting with calendar year 2027, the amount is indexed for inflation and rounded to the nearest $100 (IRC §6041(h)).

You may still see $600 in older articles and even in some IRS regulations. The statute controls over that older regulation text. Treasury has proposed regulations (REG-113229-25) to update the regulation text, and they were still proposed when this article was written.

Your First 1099 Season, Step by Step

1. Before you pay a new vendor, ask for a Form W-9. It gives you the vendor's name, tax classification and TIN. Keep it in your records and keep it confidential. Do not routinely send it to the IRS (IRS, General Instructions for Certain Information Returns).
2. Keep a running total for each vendor. The $2,000 test is per person, per calendar year (IRC §6041(a)). Track services, rent and other payment types separately.
3. In January, add up the year. Compare each vendor's total to $2,000 and sort them into "form" and "no form."
4. File Form 1099-NEC and send the vendor a copy by January 31. This deadline applies to both the IRS and the vendor (IRC §6041(d); IRC §6071(c)).
5. Use Form 1099-MISC for rent and similar payments. The vendor copy is generally due January 31. The IRS copy is due February 28 on paper or March 31 if filed electronically (IRC §6071; Instructions for Forms 1099-MISC and 1099-NEC).
6. Know the e-file rule. If you file 10 or more information returns in total, counting all types together, you generally must file electronically. A waiver may be available (T.D. 9972; Treas. Reg. §301.6011-2).
7. Keep your records. Keep proof of what you paid every vendor, even those under $2,000, so you can support your deductions.

Deadlines for Payments Made in 2026

January 31, 2027 and February 28, 2027 both fall on a Sunday, so the due dates move to the next business day (IRC §7503; Treas. Reg. §301.7503-1). A few Form 1099-MISC statements, such as gross proceeds paid to an attorney, have a February 15 vendor deadline instead (IRS, General Instructions for Certain Information Returns).

Backup Withholding: The Part Most New Owners Miss

Backup withholding means you hold back part of a payment and send it to the IRS. You generally must do this if a vendor does not give you a TIN, or if the IRS notifies you that the TIN the vendor gave you is wrong. It applies only to payments that are otherwise reportable, and certain exceptions and timing rules apply (IRC §3406(a)(1)(A) and (B)). The rate is currently 24 percent (IRC §3406(a)(1); IRS, Backup Withholding). You report and deposit it with the IRS on Form 945.

Normally, withholding does not begin until payments to a vendor reach the same threshold used for 1099s, which is $2,000 for 2026 (IRC §3406(b)(6)). But there is a catch. A long-standing regulation removes that cushion if you were required to file a 1099 for the vendor last year, or were required to withhold from that vendor last year (Treas. Reg. §31.3406(b)(3)-1(b)(3)(ii)(A)). The regulation text still shows the old $600 figure. The proposed update replaces the dollar amount but keeps this prior-year rule (REG-113229-25). Check the current status of that proposal before relying on it.

Here is what that can look like. A contractor was paid $9,000 in 2025 and you filed a 1099. In 2026 you pay the same contractor $1,400, which is below $2,000, so no 1099 is needed. If the IRS has told you before those payments that the contractor's TIN is wrong, you would generally owe backup withholding of $336 (24% of $1,400) on payments that never show up on a 1099. The easy fix is to collect a W-9 up front and check it before you pay.

What Happens if You Get It Wrong

There are separate penalties for filing a late or incorrect information return and for giving the vendor a late or incorrect copy (IRC §6721; IRC §6722). For forms due in 2026, the IRS lists $60, $130 or $340 per form depending on how late you are, and $680 per form for intentional disregard, with no cap on the total for intentional disregard. The amounts are adjusted for inflation, so amounts for forms due in 2027 may be higher. Check the IRS penalty page for the current numbers (IRS, Information Return Penalties).

Penalties can be avoided if you show the failure was due to reasonable cause and not willful neglect (IRC §6724; Treas. Reg. §301.6724-1). The best protection is simple: get the W-9, keep your records, and file on time.

Employee or Independent Contractor?

A 1099 does not make someone an independent contractor. You decide whether a worker is an employee or a contractor before you decide between a Form W-2 and a Form 1099. The IRS generally treats a worker as an employee when the payer has the right to control the details of how the services are performed (IRS Publication 15).

The IRS looks at the whole relationship, using three groups of facts: behavioral control (who controls how the work is done), financial control (who controls the business side of the job) and the type of relationship (contracts, benefits, how long it lasts). No single factor decides it (IRS, Independent Contractor (Self-Employed) or Employee?). If you are not sure about a worker, ask us before you decide.

Five Mistakes New Business Owners Make

• Waiting until January to ask for a W-9.
• Assuming every LLC is exempt. It depends on how the LLC is taxed.
• Forgetting that rent and attorney fees can need a form.
• Sending a 1099 for payments you made by credit card. Those are reported by the card company.
• Ignoring your state. Some states have their own 1099 filing or withholding rules, so check yours.

Common Questions About 1099s

Do I send a 1099 to everyone I pay?

No. Only to people you paid at least $2,000 in the year, for services or rent, in the course of your business, who are generally not corporations.

Is the 1099 threshold $600 or $2,000?

For payments made after December 31, 2025, it is $2,000. The $600 figure applied to earlier years (IRC §6041(a); Pub. L. 119-21, §70433). Some categories keep their own thresholds, such as $10 for royalties and $600 for gross proceeds paid to an attorney.

Do I send a 1099 to an LLC?

It depends on how the LLC is taxed. An LLC taxed as a partnership is reported as a partnership. An LLC taxed as a C or S corporation generally does not get a 1099. A single-member LLC that is ignored for tax purposes is reported under its owner's name and TIN. Ask for a W-9.

Do I send a 1099 to a corporation?

Generally no, but there are exceptions, including attorney fees and medical and health care payments (Treas. Reg. §1.6041-3(p)(1)).

What if I paid a vendor less than $2,000?

You generally do not need to file a 1099 for that vendor for 2026. Keep your records anyway, and be careful about backup withholding if the vendor has a missing or wrong TIN, especially if you filed a 1099 for that vendor last year.

What if I paid through a credit card, PayPal or Venmo?

Credit and debit card payments are reported by the card company on Form 1099-K, not by you (IRC §6050W). For payment apps, the app only has to file a Form 1099-K for a vendor above $20,000 and more than 200 transactions. If you pay vendors mostly through apps, ask us how that applies to you.

What if I pay a foreign contractor?

Payments to foreign persons may need a different form, such as Form 1042-S, instead of a Form 1099. Ask us before you pay.

Do I need a W-9 from every vendor?

It is a good habit. A W-9 is how you get the TIN you need to file a 1099 and to avoid backup withholding. Keep it confidential.

What is the deadline?

January 31 for Form 1099-NEC. For payments made in 2026, January 31, 2027 falls on a Sunday, so the due date is Monday, February 1, 2027 (IRC §6071(c); IRC §7503).

Your Next Step

If you are not sure who gets a 1099 in your business, a short conversation before January is much cheaper than fixing mistakes after. Mahmoud Abotteen, CPA, and our team can review your vendor list with you and set up a simple system for next year.