1099-NEC and 1099-MISC: thresholds, forms & due dates
If you paid an independent contractor or vendor $600 or more in a calendar year by check, ACH, cash, or wire, you have to issue them a 1099 by January 31. The form type, the threshold, the W-9 prerequisite, and the credit-card carve-out trip up most small businesses every year.
1099-NEC vs 1099-MISC — pick the right form
| Use 1099-NEC for… | Use 1099-MISC for… |
|---|---|
| Independent contractor services ($600+) | Rents to landlords (Box 1, $600+) |
| Freelance / gig-worker fees | Royalties ($10+, Box 2) |
| Professional fees (consultants, designers) | Prizes and awards ($600+, Box 3) |
| Director fees | Medical and health-care payments ($600+, Box 6) — even to corporations |
| Attorney fees for non-employee services | Gross proceeds to an attorney ($600+, Box 10) — even to law-firm corporations |
The $600 rule, decoded
Add up every direct payment to a single payee during the calendar year. Direct = check, ACH, cash, or wire. Crosses $600? Issue a 1099 to that payee. Below $600? No 1099 required (but still record the deduction on your return).
Two important carve-outs:
- Credit card / processor payments do not count — they get 1099-K'd by the processor (Stripe, PayPal, Square). Issuing a 1099-NEC for those would double-report the contractor's income.
- Goods don't count — only services. Paying $5,000 for office supplies is not a 1099 trigger; paying $5,000 to a consultant is.
When is a payee exempt?
C corporations and S corporations are exempt from 1099 reporting for most payment types, with two exceptions:
- Medical and health-care payments (1099-MISC Box 6) — always reportable, including to incorporated medical practices.
- Attorney fees — always reportable, including to law-firm corporations and PLLCs. Use Box 1 of 1099-NEC for non-employee attorney services, or Box 10 of 1099-MISC for gross proceeds where the attorney is acting as a settlement agent.
The W-9 the contractor returns tells you their federal tax classification — that's how you know whether they're a corporation (probably exempt) or a sole proprietor / partnership / LLC (almost certainly not exempt).
Due dates and penalties
| Action | Deadline |
|---|---|
| Issue 1099-NEC to recipient | January 31 |
| File 1099-NEC with IRS (e-file or paper) | January 31 |
| Issue 1099-MISC to recipient (most boxes) | January 31 |
| File 1099-MISC with IRS (paper / e-file) | February 28 (paper) / March 31 (e-file) |
Per-form late-filing penalties for tax year 2025 (filed in 2026): $60 within 30 days, $130 by August 1, $330 thereafter, $660 for intentional disregard. Caps are higher for large businesses.
How HelloBooks does this (1099 wizard in private preview)
W-9 collection at vendor onboarding is live today across HelloBooks. The 1099 generation and IRS e-file wizard described below is in private preview ahead of the January 31 cycle — ask us for access so we can enable it on your account before year-end.
- 1
Collect a W-9 at vendor onboarding
When you save a new vendor in HelloBooks, the system prompts for a W-9 and emails the contractor a secure upload link if you don't have one on file. The W-9 PDF lives on the vendor record so you have it ready for 1099 season.
- 2
Tag payments correctly
Mark each bill or contractor payment as 1099-eligible at posting time. HelloBooks tracks the running total per vendor per calendar year and tells you the moment any vendor crosses the $600 threshold.
- 3
Reconcile credit-card payments out
HelloBooks separates payments made by credit card or third-party processor from direct payments. Only direct payments count toward the 1099 — the processor 1099-K's the rest. This is the most common 1099 mistake; we catch it automatically.
- 4
Run the 1099 wizard in January
In the first week of January, run the 1099 wizard. HelloBooks generates Copy A for the IRS, Copy B and 2 for the recipient, and Copy C for your records — pre-filled with the vendor's W-9 data and the year's totals. Review each form, fix any flagged TIN mismatches, and e-file to the IRS through HelloBooks.
- 5
Deliver to recipients by January 31
HelloBooks emails each contractor a secure link to download their Copy B / Copy 2. Recipients who opted out of e-delivery get mailed paper copies. The wizard tracks delivery confirmations so you can prove timely delivery if challenged.
Frequently asked questions
When do I have to file a 1099-NEC vs a 1099-MISC?
1099-NEC is for non-employee compensation — independent contractors, freelancers, gig workers, and any service-provider you paid $600 or more in the calendar year. 1099-MISC is for other payments: rents (Box 1), royalties (Box 2), prizes and awards (Box 3), medical and health-care payments (Box 6), gross attorney fees that are not non-employee compensation (Box 10), and a handful of other categories. Most small businesses use 1099-NEC; 1099-MISC is the catch-all.
What is the $600 threshold and what counts toward it?
The threshold is $600 paid to a single payee during the calendar year for services. It is the aggregate of all payments — five $150 invoices to the same contractor crosses the threshold even though no individual payment did. Payments for goods do not count. Reimbursed expenses paid through the same invoice count unless billed separately under an accountable plan.
Who is exempt from 1099 reporting?
C corporations and S corporations are exempt for most types of payments, with two key exceptions: medical and health-care payments (always reportable on 1099-MISC Box 6) and gross attorney fees (always reportable, even to law-firm corporations, on 1099-MISC Box 10 or 1099-NEC Box 1). Tax-exempt organizations under section 501(a) are generally exempt. Payments to employees go on W-2, not 1099, regardless of amount.
What is a W-9 and why do I need one before issuing a 1099?
Form W-9 is the IRS form a contractor fills out to give you their legal name, business name (if different), federal tax classification, and Taxpayer Identification Number (TIN — either an SSN or EIN). You need it on file before issuing the 1099 so the form has a valid TIN. If the contractor refuses to provide a W-9, you must withhold 24% backup withholding from every payment and remit it to the IRS.
When are 1099s due?
January 31 of the following year — both to the recipient and to the IRS. There is no extended IRS deadline for 1099-NEC. State 1099 deadlines vary; most match the federal January 31 but a few (California, New York, Pennsylvania) have separate state filing requirements with their own due dates.
What are the penalties for missing the deadline?
Per-form penalties scale with how late you file: $60 if you file within 30 days of January 31, $130 if you file by August 1, $330 if filed after August 1 or not at all, and $660 per form for intentional disregard. Penalties also apply for filing with a missing or incorrect TIN. The penalty caps are higher for businesses with > $5M in gross receipts.
Do I issue a 1099 for payments made by credit card or third-party processor?
No. Payments made by credit card, debit card, or third-party settlement organizations (PayPal, Stripe, Square, Venmo Business) are reported on 1099-K by the processor, not by you on 1099-NEC. Only direct payments — checks, ACH, cash, wires — go on your 1099-NEC. This is the most common 1099 mistake — double-reporting payments that the processor already 1099-K'd.
What is backup withholding and when does it apply?
Backup withholding is a 24% federal income tax deduction you must apply to every payment when (a) the contractor refused to provide a W-9, (b) the TIN on the W-9 fails IRS matching, or (c) the IRS specifically notified you to start backup withholding for a payee. The amount withheld is remitted to the IRS quarterly on Form 945 and reported in Box 4 of the recipient's 1099.
More on US compliance
US Sales Tax: Nexus, Marketplace Facilitator & Multi-State Filing
Nexus thresholds after Wayfair, marketplace facilitator rules, and the registration / collection / remittance loop for multi-state SMBs.
Read sales taxUS Payroll: W-2, W-4, FICA, FUTA & Federal/State Withholding
W-4 onboarding, FICA + FUTA computation, state withholding, and the W-2 / W-3 cycle that closes out the year.
Read payroll & w-2State Franchise Tax: Delaware, California, Texas & New York
The flat-fee state taxes LLCs and corporations owe just for existing — DE annual report, CA $800 minimum, TX margin, NY biennial.
Read franchise taxQuarterly Estimated Tax: Form 1040-ES, Safe Harbor & Due Dates
How to compute Form 1040-ES, the safe-harbor rules, the four due dates, and how HelloBooks pre-fills the worksheet from your books.
Read quarterly estimated taxAuthoritative sources
US tax rules change every filing season. Always verify the current position with the official sources below before filing.
- IRS — irs.govInternal Revenue Service. Forms, publications, due dates, and current-year thresholds for federal income tax, payroll tax, and 1099 reporting.
- IRS — Forms & InstructionsCanonical PDF forms (W-4, W-9, 1099-NEC, 1040-ES, 941, 940, W-2, W-3) with current-year instructions.
- SSA — Business Services OnlineSocial Security Administration portal for W-2 / W-3 e-filing, EIN verification, and AccuWage validation.
- Streamlined Sales Tax — streamlinedsalestax.orgMulti-state Streamlined Sales and Use Tax Agreement (SSUTA) — registration in 24 SST member states with one application.
- Tax Foundation — Sales Tax & NexusIndependent state-by-state research on sales tax rates, economic nexus thresholds, and franchise / margin tax structures.
Run all of this on autopilot in HelloBooks
US sales tax, state franchise tax, and quarterly estimated tax workflows are built into the free plan. Plaid connects 11,000+ US banks so transactions land in your books automatically. 1099 generation and Gusto-backed payroll are in private preview — ask us for access.