Form 1099 Reporting Requirements for Small Businesses

1099 filing requirements:

1099-NEC (Nonemployee Compensation):

• Who gets one: any person or unincorporated entity you paid $600+ for services during the year
• What triggers it: payments for services performed by someone who isn’t your employee
• Common recipients: subcontractors, freelancers, consultants, attorneys (always, even if incorporated)
• Exceptions: payments to C-Corporations and S-Corporations (most payments to corps do NOT require a 1099, with the exception of attorneys and medical/health care payments)
• Deadline: January 31 (to both the IRS and the recipient). No extension available.
• Filed on: paper to the IRS or electronically (e-filing required if 10+ forms)

1099-MISC (Miscellaneous):

• Rent paid ($600+): to landlords, equipment lessors
• Royalties ($10+): patent, copyright, mineral rights
• Prizes and awards ($600+): to non-employees
• Medical and health care payments ($600+): to medical providers (including payments to incorporated medical practices)
• Crop insurance proceeds ($600+)
• Attorney fees ($600+): for legal services (even if the law firm is incorporated)
• Deadline: February 28 (paper) or March 31 (e-file) to the IRS. January 31 to the recipient.

1099-K (Payment Card and Third-Party Network Transactions):

• Filed by PAYMENT PROCESSORS (PayPal, Stripe, Venmo, Square, Amazon), not by the business paying
• Current threshold (2024+): $5,000 in gross payments (phasing down from the original $20,000/200 transactions)
• If you receive payments through a payment processor, the processor files the 1099-K, and you report the income on your return
• If you make payments through a processor, you typically don’t need to file a 1099-NEC for the same payments (the 1099-K covers them)

W-9 collection:

• Before paying any contractor, collect a completed Form W-9 (name, address, TIN)
• If the contractor refuses to provide a W-9: you must withhold 24% of the payment (backup withholding) and remit to the IRS
• Best practice: collect the W-9 before the first payment, not at year-end

Penalties for failure to file:

Filed	Penalty per Form
Within 30 days of deadline	$60
By August 1	$130
After August 1 or not at all	$310
Intentional disregard	$630 (no cap)

• Annual caps exist ($660,000-$3,783,000 depending on timing and business size)
• Small businesses (gross receipts ≤ $5M): lower caps apply

Corrected 1099s:

• If you file a 1099 with incorrect information (wrong amount, wrong TIN): file a corrected 1099 (check the “Corrected” box)
• No penalty if corrected within 30 days of the deadline