What payments require me to file 1099 forms?

Modified on Thu, 02 Feb 2023 at 07:35 PM

If you run a small business or are an individual who's considered to be self-employed, and you made payments last year to an individual or entity who is not an employee totaling more than $600, then these payments must be reported to the IRS. 

This can be done using one of the following:

  • Form 1099-MISC, Miscellaneous Payments
  • Form 1099-NEC, Nonemployee Compensation

In general, these 1099s are used when working with other businesses, individuals, freelancers, subcontractors, independent contractors, or vendors. They don’t, however, have to be issued for payments made to corporations for services rendered. 

Which Payments Qualify?

If you paid an independent contractor or freelancer to do more than $600 worth of work, then this should be reported using Form 1099-NEC.

Form 1099-MISC should be used for any of the following payments in excess of $600:

  • Rents
  • Prizes and awards
  • Other income payments
  • Medical and health care payments
  • Crop insurance proceeds
  • Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish
  • Generally, the cash paid from a notional principal contract to an individual, partnership, or estate
  • Payments to an attorney
  • Any fishing boat proceeds

In addition, use Form 1099-MISC to report that you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.

How to File Form 1099

Before engaging in business, you'll want to request a Form W-9 from your vendors, contractors, and other payment recipients. This will provide you with their: 

  • Legal name
  • Address
  • Taxpayer identification number

Keep track of your payments all year long, and issue either a 1099-NEC or 1099-MISC summarizing this activity early the following year before January 31st.

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