1099 Reporting Requirements: Who Gets a 1099, When to File, and Penalties for Late Filing
Every business that pays $600 or more in a year to a non-employee for services must file a 1099-NEC (Nonemployee Compensation) with the IRS and provide a copy to the recipient. This applies to independent contractors, freelancers, consultants, subcontractors, attorneys (regardless of entity type), and anyone else who performs services for your business and is not on your payroll. The filing deadline is January 31 (no automatic extension). Penalties for late filing start at $60 per form and increase to $310 per form after August 1. For a business with 20 subcontractors, a missed deadline can cost $1,200-$6,200 in penalties. The most common compliance mistake is failing to collect a W-9 from the contractor before making the first payment, which makes it difficult to file the 1099 at year-end.
1099-NEC basics:
Who gets a 1099-NEC:
- Any individual or non-corporate entity paid $600+ for services in a calendar year
- Independent contractors, freelancers, subcontractors
- Attorneys (ALWAYS get a 1099, even if they are a corporation)
- Commission payments
- Prizes and awards (if paid for services)
Who does NOT get a 1099-NEC:
- Employees (they get W-2)
- Corporations (C-Corp or S-Corp), EXCEPT attorneys
- Payments made via credit card, debit card, or third-party payment networks (these are reported on 1099-K by the payment processor)
- Tax-exempt organizations (generally)
- Payments for merchandise, freight, or storage
- Rent (reported on 1099-MISC, not 1099-NEC)
Other 1099 forms:
| Form | Reports | Threshold |
|---|---|---|
| 1099-NEC | Nonemployee compensation | $600 |
| 1099-MISC | Rent, prizes, attorney fees (non-NEC), other income | $600 ($10 for royalties) |
| 1099-INT | Interest paid | $10 |
| 1099-DIV | Dividends paid | $10 |
| 1099-K | Payment card/third-party network transactions | $5,000 (2024), $2,500 (2025), $600 (future) |
Deadlines:
- January 31: File 1099-NEC with the IRS AND provide copy to the recipient
- No automatic extension (unlike most other information returns)
- 1099-MISC: January 31 to recipients, February 28 to IRS (March 31 if e-filing)
Penalties for late filing (2025):
| How Late | Per Form | Small Business Max (≤$6.3M revenue) |
|---|---|---|
| Within 30 days | $60 | $232,500 |
| By August 1 | $130 | $664,500 |
| After August 1 | $310 | $1,329,000 |
| Intentional disregard | $660 | No maximum |
The W-9 is the foundation:
- Collect Form W-9 from every contractor BEFORE the first payment
- W-9 provides: legal name, entity type (determines if 1099 is required), SSN or EIN, address
- If you don’t collect a W-9: withhold 24% backup withholding from the payment (IRC 3406)
- Best practice: make payment contingent on receiving a completed W-9
What does 1099 compliance look like in practice?
Start with a Diagnostic: a CPA licensed in the US and Canada reads your file and answers in writing, three to four business days after you finish the questions. $250 for cross-border, $195 for a second opinion on a filed return, and it comes straight off the bill if we do the work after. Or book a free 15-minute fit call first.
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Yarik Yarosh, CPA. "1099 Reporting Requirements: Who Gets a 1099, When to File, and Penalties for Late Filing." Blue Cloud CPA, September 5, 2026. https://bluecloudcpa.com/guides/small-business-1099-reporting-requirements-penalties
This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.