You probably do. If you paid a non-employee $600 or more for business services during the year, you need to file Form 1099-NEC with the IRS and send a copy to the contractor.
You hired your first contractor this year. Maybe a second one, too. Things were fine until somebody mentioned "1099s" at a networking event and now you're lying awake wondering if you're supposed to be mailing forms to the government. The details are where smart people get tripped up, because the rules have a handful of exceptions that look like trapdoors if you don't know they're there.
The $600 Rule, Plain and Simple
Form 1099-NEC is what you file to report nonemployee compensation. NEC stands for Non-Employee Compensation. That's the IRS's way of saying "money you paid a freelancer, contractor, or vendor who isn't on your payroll." The threshold is $600. You pay someone $599 for business services, you're clear. You pay them $600, you file.
It's the total for the year that matters. Say you're a photographer in Savannah and you hire a retoucher for $200 a pop in March, June, and October. That's $600 even though no single payment hit the threshold. You still file.
The payment has to be for services in the course of your trade or business. If you paid somebody for personal stuff, that doesn't count. The electrician who rewired your shop? Business expense, file a 1099 if you crossed $600. The same electrician who wired your cousin's house as a personal favor you paid for? Not your business, not your 1099.
The Deadline and What It Costs to Miss It
Form 1099-NEC is due January 31. That's both the deadline for filing with the IRS and the deadline for getting the contractor copy to the person you paid. No extra time. No automatic extension for this one the way some other forms get.
Miss it and the penalty starts at $60 per form. It climbs to $330 per form depending on how late you are. If the IRS decides you intentionally disregarded the filing requirement, that jumps to $660 per form. Five contractors, intentionally late, that's $3,300. Ten contractors, careless and very late, $3,300 before the IRS even blinks. You still have to file the forms on top of paying the penalty.
It's February 3. You just realized January 31 came and went and you filed nothing. Your stomach drops. That's the moment most people pick up the phone.
Who Does NOT Get a 1099
Here's where it gets interesting. You generally don't send a 1099 to a contractor who's a C corporation or an S corporation. If you hired an incorporated business for services, the IRS figures the corporation will report its own income and doesn't need you to wave a flag about it.
So how do you know if your contractor is a corporation or a sole proprietor? You ask. Before you pay a contractor for the first time, have them fill out Form W-9. It's a one-page document that gives you their legal name, business structure, and taxpayer identification number. You need that information to file a 1099 accurately. Get it upfront when the relationship is warm, not in January when everyone's scrambling.
There are exceptions to the corporation exception. Lawyers always get a 1099, even if they practice as a corporation. If you paid an attorney $600 or more for legal services related to your business, you file the form regardless of their business structure. There are a couple of other narrow exceptions, but the lawyer one is the one most small businesses actually run into.
The W-9 isn't optional homework. It's the document that makes the whole 1099 process possible. Asking for it before you pay is the easiest way to stay ahead.
How You Paid Matters as Much as Who You Paid
This trips up a lot of people. If you paid a contractor by credit card or through a business third-party payment processor like PayPal, Stripe, or Venmo for Business, you don't need to issue a 1099. The payment processor handles the reporting on a Form 1099-K. That's their job, not yours.
Say you run a food truck on Broughton Street and you pay a graphic designer $1,200 to redesign your menu wrap. You pay through your business card via the designer's invoicing platform. The processor reports that income to the IRS. You don't file a 1099-NEC for that payment.
But here's the catch. If you paid the same designer through personal Venmo or PayPal Friends and Family, you do need to file a 1099. Those aren't business payment processors. The IRS treats those payments the same as cash or check. Using personal payment accounts for business transactions also violates most platforms' terms of service and makes your bookkeeping messier than it needs to be.
So the rule of thumb: if you paid by cash, check, ACH transfer, or personal payment app, you file. If you paid by credit card or through a business payment platform, you don't.
A quick example. You're a barber who hired a social media manager for $150 a month. You pay them through your business checking account via direct deposit. Over the year that's $1,800. You file a 1099-NEC because you paid by ACH and the total crossed $600. If you had paid through a business PayPal account instead, you wouldn't need to.
Getting the W-9 Early
This is the step that prevents 90% of the last-minute panic. Every contractor you work with should give you a completed W-9 before they ever see a dollar. Not after the first payment. Not in December. Before.
The W-9 tells you the contractor's legal name, business name if different, address, taxpayer identification number, and business structure. That last one is how you know whether they're a sole proprietor, partnership, LLC, or corporation. That determines whether you file a 1099 at all.
Keep the W-9 on file. Some businesses request a fresh one every year, which the IRS doesn't require but is a good practice. Contractors change addresses, restructure their businesses, and occasionally get new tax ID numbers. Electronic copies are fine. Keep them somewhere you can find them in January.
What Counts Toward the $600
The $600 threshold is about payments for services. Not goods. If you buy $2,000 worth of product from a wholesaler, you don't file a 1099 for that. If you pay someone $800 to build a custom display for your shop, you do.
Here's a borderline case. You hire a contractor who bills you $1,400 for a project, and that $1,400 includes $600 in materials they purchased on your behalf. Do you file? You file for the full $1,400 if the payment was made to an individual or partnership for services performed in your business. The contractor paid for materials as part of providing the service and you reimbursed them. The total payment is what you report.
When You Have to File Electronically
If you file 10 or more information returns total, you're required to file electronically. That's 10 combined, not 10 of each type. If you have three W-2s for employees and seven 1099-NECs for contractors, that's 10. You e-file.
The IRS has a free e-filing system called the Information Returns Intake System, or IRIS. It's built for small businesses that don't want to buy filing software. You can also use paid platforms like Tax1099 or Avalara if you want features like automatic TIN verification and direct contractor delivery.
If you file on paper, you include Form 1096, which is a summary transmittal. You don't need that if you e-file. For most small businesses that have crossed the 10-return threshold, e-filing is both required and easier.
The Edge Cases That Bite
A few situations come up often enough to name.
You paid a contractor $599 last year and $599 this year. Each year is separate. You don't combine years. Each year has its own $600 threshold.
Your contractor is an LLC taxed as an S corp. You don't file a 1099. The W-9 will show their election and you're off the hook. But if that same LLC is taxed as a sole proprietor, you do file.
You paid a lawyer $750 for reviewing a contract. You file a 1099 even if they're incorporated. The lawyer exception doesn't care about business structure.
You paid someone through your business PayPal account. PayPal reports it. You don't file. You paid the same person through Venmo from your personal account. You file.
Where This Gets Real
The rules themselves aren't complicated once you know them. The work is in the details. Tracking every payment. Collecting W-9s before the first invoice gets paid. Sorting out which payments went through business processors versus personal ones. Making sure the math is right across every contractor before January 31.
That's the work Nomadica does for clients. We track the payments, request and store the W-9s, file the 1099s on time, and catch the exceptions before they become penalties. If you've got contractors and you're not sure which ones need a form, send us your payment records and we'll tell you exactly where you stand before the deadline gets here.