If you only receive 1099s, this article is not for you — though it is worth knowing why a client of yours might not send one. This is for the business on the other side: the one making the payments and filing the forms.

Most guidance tells a payer which payments to report. The more useful list is the other one.

The short answer

You paid Your 1099-NEC?
A contractor, by cheque, cash or bank transfer, over the threshold yes
A contractor, by credit card, debit card or payment app no — the settlement entity reports it on a 1099-K
An incorporated business no, unless it is for medical or legal services
Anyone, but not in the course of a trade or business no
A contractor, under the threshold no form required — though the income is still theirs to report

The first two lines are where the money and the mistakes are.

The card payment rule, and the double report it prevents

This is the one that surprises people, and it has been true for years without becoming widely known.

If you pay a contractor through a payment card or third party network transaction, that payment is reportable by the settlement entity on Form 1099-K. It is not yours to put on a 1099-NEC.

Send one anyway and the same $9,000 is now reported twice to the IRS under the contractor's name — once by the card processor and once by you. Your contractor then spends their January trying to explain a number that is double what they earned, and the explanation is that their client was being conscientious.

The rule in one lineIf the money went through a card or a payment app, somebody else already has the reporting duty. Your job is to not do it again.

This makes how you paid a piece of accounting data, not just a banking detail. A payables record that captures amount and payee but not method cannot answer the question in January.

The corporation exception

The IRS guidance excepts a payment made "to another business that is incorporated, and the payment is not for medical or legal services."

Two practical notes.

You need to know the entity type, and the only reliable way to know it is the Form W-9 the payee completed. Guessing from a business name is how an LLC taxed as a partnership gets missed and an S-corporation gets a form it did not need.

Medical and legal services are carved out. Payments to an incorporated law firm or medical practice stay reportable. Attorneys in particular get their own treatment — gross proceeds paid to an attorney are reported on Form 1099-MISC box 10, and that box kept the $600 threshold when the others moved.

The thresholds you are filing against

For payments before 2026 the figure was $600. The instructions state that for tax years beginning after 2025, the minimum threshold for reporting certain payments — and for backup withholding on those payments — increased to $2,000.

Note the second half of that sentence. The threshold change carries backup withholding with it, so the point at which a missing TIN becomes your problem moved too.

Two deadlines, not one

The most common filing error in small businesses is treating the two forms as having one date.

Form To the recipient To the IRS
1099-NEC January 31 January 31
1099-MISC January 31 February 28 paper · March 31 electronic

Section 6071(c) requires Form 1099-NEC "on or before January 31, using either paper or electronic filing procedures." There is no later date for the IRS copy and no paper-versus-electronic difference. For 1099-MISC there is both.

The W-9 is the whole system

Every decision above depends on information only the payee can give you: legal name, TIN, entity type, and whether they are a corporation.

Collect the W-9 before the first payment, not in January. Two reasons:

  1. It answers the corporation question while you still have the leverage of an unpaid invoice.
  2. It prevents backup withholding. The 1099-NEC instructions name the case directly: persons who have not furnished their TINs are subject to withholding on payments reportable in box 1a. Once you are withholding, you have a deposit obligation and a much longer conversation.

A vendor who will not complete a W-9 is telling you something before any work has started.

A payables record that answers January's questions

Four fields, captured at payment time, remove almost all of this work:

  1. Payee legal name and TIN, from the W-9.
  2. Entity type — corporation or not, and whether the service is medical or legal.
  3. Amount.
  4. Payment method — and specifically whether it settled through a card or payment app.

With those four, the filing list builds itself. Without the fourth, it cannot.

The goal is not to send more forms. It is to send exactly the ones that are yours.

Track it now. Thank yourself in April.

Common questions

Do I issue a 1099-NEC if I paid a contractor by credit card or PayPal?
Generally no. The IRS treats payments settled through any payment card or third party network transaction as reportable on Form 1099-K by the settlement entity, not by you on a 1099-NEC. Issuing one anyway creates a duplicate report of the same income.
Do I have to send a 1099 to a corporation?
Usually not. The IRS guidance excepts a payment made "to another business that is incorporated" — unless the payment is for medical or legal services, which remain reportable.
What is the 1099-NEC threshold for payments I make?
For payments before 2026 it was $600. For tax years beginning after 2025 the minimum threshold for reporting certain payments, and for backup withholding on them, increased to $2,000.
When is Form 1099-NEC due?
Section 6071(c) requires filing "on or before January 31, using either paper or electronic filing procedures" — the same date as the copy to the recipient.
Is Form 1099-MISC due at the same time?
No, and this catches people. Payee statements go out by January 31, but the IRS copy is due February 28 on paper or March 31 if filing electronically.
What happens if a contractor will not give me a TIN?
Backup withholding applies. The 1099-NEC instructions give this exact case: persons who have not furnished their TINs are subject to withholding on payments reportable in box 1a. Collect the W-9 before the first payment and the problem never starts.
Does the higher threshold mean less work for me?
Fewer forms, not less recordkeeping. You still need to know what you paid, to whom, and by what method — and the method is now what decides whether a form is yours to file at all.

This article is for educational purposes only and does not constitute tax, legal, or financial advice. Consult a qualified tax professional about your situation.

Official sources