Who gets a 1099-NEC form?
Form 1099-NEC Nonemployee Compensation is used to report payments made to nonemployees for services provided in the course of a trade or business (including parts and materials). Typically, businesses must issue a 1099-NEC to independent contractors, freelancers, and other service providers who are not employees and who receive compensation during the year above the IRS threshold. However, the reporting requirement depends on several factors, including the type of service, whether the payment was for a business purpose, and the recipient’s entity type, as some corporations are generally exempt with certain exceptions. You must file with the IRS and furnish a copy of Form 1099-NEC when you withhold any amount of federal income tax from a contractor's pay under backup withholding rules, regardless of how small the total service payment was.
The 1099-NEC is the form that will be needed to report independent contractor payments for calendar year starting 2020. NEC stands for Nonemployee Compensation and Form 1099-NEC is taking the place of what used to be recorded in Box 7 of Form 1099-MISC.
So who gets a 1099-NEC? Typically, this form is issued to independent contractors, janitorial services, third-party accounts and any other worker paid for services who is not on the payroll.
But like many IRS regulations, it’s not quite so simple. Let’s look at some factors that help determine whether a 1099-NEC is needed.
The first rule of thumb is that the payment must be at least $600. If it’s less than that amount, a 1099-NEC is not required and should not be issued.
Say you contract with a worker to remodel your office breakroom. The total comes to $5,000. You would likely issue a 1099-NEC in this case. But let’s say you contracted that same worker to remodel the kitchen in your home. Do you need to issue a 1099-NEC? The answer is no, because the kitchen remodeling was for personal, not business reasons.
It’s a common belief that businesses don’t need to send out 1099-NEC forms to corporations. And this is true. Sometimes.
In general, you don’t have to issue 1099-NEC forms to C Corporations and S Corporations. But there are some exceptions, including:
You can read about other exceptions, such as cash payments for fish (yes, it’s a thing) here.
You will need to send out a 1099-NEC form if you’re working with an LLC sole proprietorship. An easy way to tell? Just look at the W-9 the worker provided. If the W-9 indicates they are an LLC that is taxed as a sole proprietorship, you need to send a 1099. If their LLC is taxed as an S- or a C-Corp you do not (unless an exception applies as described above).
If you’re unsure, it’s always best to file a 1099-NEC. There’s no penalty if you file one but you didn’t need to. On the other hand, not filing one that is required can lead to hefty penalties.
And here’s a final tip: Always get the W-9 before you issue payments to any vendor who may be required to get a 1099-NEC. Less-reputable vendors might not be around when you need their information at tax time.
A 1099-NEC is issued to nonemployees such as individuals, sole proprietors, partnerships, or depending on the tax classification, limited liability companies (LLC). This includes independent contractors, freelancers, gig workers, and others such as professional service providers, board directors and referral partners that earn commissions for sending clients to your business. Form 1099-NEC is also issued to individuals (like key consultants or independent directors) who received a payout characterized as an excess golden parachute payment. Anyone that received direct sales totaling $5,000 or more of consumer products on a buy-sell, deposit-commission, or any other basis for resale should receive a Form 1099-NEC. A form must also be issued to anyone from whom you withheld any amount of federal income tax under backup withholding rules, regardless of how small the total service payment was.
For calendar year 2025, a business must generally issue a 1099-NEC when payments for services total $600 or more during the year. Payments below this amount typically do not require a form.
No. A 1099-NEC is only required for payments made in the course of a business. Payments for personal services, such as home projects, do not require a 1099-NEC.
Businesses generally do not issue 1099-NEC forms to C corporations or S corporations. However, certain payments—such as legal services or some medical payments—may still require reporting.
It depends on how the LLC is taxed. LLCs taxed as sole proprietorships typically receive a 1099-NEC, while those taxed as corporations usually do not unless an exception applies. This is usually confirmed on the vendor’s W-9.
Updated: 07/09/2025
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