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Who Gets a Form 1099-NEC? A Quick Guide to
Reporting Nonemployee Compensation
Understand who receives a 1099, which payees and payments are excluded, and how a payer confirms, reports,
and files for each one.
Table of Contents
Table of Contents
By Charles Hardy | Last updated: Oct 16, 2026
Key Insights: Who gets a 1099-NEC
- A business generally files a 1099-NEC for each non-employee it pays $2,000 or more for services in 2026 in the course of its trade or business.
- Recipients include independent contractors, freelancers, sole proprietors, partnerships, and LLCs not taxed as corporations. Attorneys get one even when incorporated.
- Payments to corporations, payments for merchandise, personal payments, and payments made by card or payment app generally do not need a 1099-NEC.
What is Form 1099-NEC?
Form 1099-NEC, Nonemployee Compensation, is the information return a business files for payments of fees and commissions to people it does not employ. The payer sends one copy to the IRS and another to the recipient.
Who gets a 1099-NEC?
A payee gets a Form 1099-NEC when four conditions are met. A payer can work through them in order.
- The payee is not an employee. A person on the payer’s payroll receives a Form W-2 instead.
- The payment is for services in the course of the payer’s trade or business. Personal payments are not reportable. The IRS treats nonprofit organizations and government agencies as engaged in a trade or business, so their payments for services are reportable too.
- The payee is an individual, partnership, or estate, or in some cases a corporation. The payee’s tax classification decides, as described in the next section.
- The payments reach the annual threshold. Payments below it are not reported unless backup withholding applied, in which case a form is required at any amount. Learn more about 1099 thresholds.
Learn more about 1099 thresholds.
Common recipients of 1099-NEC
| Recipient | 1099-NEC generally required? |
|---|---|
| Independent contractors and freelancers | Yes |
| Sole proprietors and gig workers | Yes |
| Partnerships and LLCs taxed as sole proprietors or partnerships | Yes |
| Attorneys and law firms, for legal services | Yes, even if incorporated |
| Directors receiving directors’ fees | Yes |
| Real estate agents paid commissions as independent contractors | Yes |
| C corporations, S corporations, and LLCs taxed as corporations | Generally, No |
| Employees | No. They receive a W-2 |
| Nonresident aliens and foreign contractors | No. Payments are reported on Form 1042-S |
Note: Payments for parts and materials count toward the total when they are part of a service.
How does a payer confirm who qualifies to get a 1099-NEC?
The payer collects a Form W-9 from each U.S. payee before the first payment. It supplies the payee’s tax classification, which settles the table above, and the TIN that goes on the form. Learn more about W-9 for independent contractors.
TaxBandits W-9 Manager lets a payer request W-9s by email, text, SmartCollect link, or QR code, collect e-signatures, and run TIN Matching.
If a payee does not provide a TIN, or the IRS reports that the TIN is incorrect, the payer must apply 24% backup withholding to reportable payments. A Form 1099-NEC is then required at any amount, and the withholding is reported in Box 4. Learn more about backup withholding.
For attorneys, the TIN must be provided, but the attorney is not required to certify it. An attorney who fails to provide one may face a $50 penalty per failure under section 6723, and the payer must backup withhold.
Which payments are reported on Form 1099-NEC?
Payments for services go in Box 1a. This includes fees, commissions, prizes and awards for services, and other compensation for services performed by someone who is not an employee. It also includes parts and materials used to perform the service when supplying them is incidental to it.
Common Box 1a payments include:
- Professional service fees, such as fees to attorneys, accountants, architects, engineers, and contractors
- Fees paid by one professional to another, including referral and fee-splitting fees
- Payments to nonemployee entertainers for services
- Directors’ fees and other remuneration, including payments made after retirement
- Commissions paid to nonemployee salespersons, including insurance salespersons who are not employees
- A contractor’s fee together with any travel reimbursement the contractor did not account for to the payer
- Exchanges of services between businesses, at the fair market value of the services performed
- Taxable fringe benefits provided to nonemployees
- An independent contractor’s total compensation, including any golden parachute payment
- Commissions paid by a state to licensed lottery ticket sales agents, when the state controls the online and instant games
Payments to attorneys
Attorney fees of $2,000 or more paid in the course of a trade or business are reported in Box 1 under section 6041A(a)(1). This applies whether the law firm is a sole proprietorship, partnership, LLC, or corporation. Learn more about 1099 for attorney fees.
Note: Fees for legal services go on Form 1099-NEC. Gross proceeds paid to an attorney, such as a settlement paid through the attorney, go in Box 10 of Form 1099-MISC.
Payments made on behalf of others
A business that pays on behalf of the person who is the source of the funds may be the payer for reporting purposes if it performs management or oversight functions over the payment or has a significant economic interest in it, such as a lien.
For example, a bank that finances a developer’s construction project and pays the contractors from a project account files a Form 1099-NEC for each contractor that reaches the threshold.
Other boxes cover specific situations
- Box 2: a checkbox for direct sales totaling $5,000 or more of consumer products to a buyer for resale, on a buy-sell, deposit-commission, or other basis, anywhere other than a permanent retail establishment. The payer can report these sales in Box 2 of Form 1099-NEC or Box 7 of Form 1099-MISC, but on only one form. If the payer uses Form 1099-NEC, it must file by January 31. The recipient’s statement for direct sales can be a letter.
- Box 3: excess golden parachute payments, which are no longer reported on Form 1099-MISC.
- Box 4: federal income tax withheld under backup withholding.
What kinds of payments don’t require a Form 1099-NEC?
Some payments do not go on Form 1099-NEC, even when they are taxable to the recipient. Many are reported on a different form instead.
- Payments to a corporation, including an LLC taxed as a C or S corporation, except legal services
- Payments for merchandise, telephone, freight, storage, and similar items
- Rent paid to real estate agents or property managers
- Wages, bonuses, prizes, and awards paid to employees
- Military differential wage payments to employees on active duty
- Business travel allowances paid to employees
- Cost of current life insurance protection
- Payments to tax-exempt organizations, including IRAs, HSAs, Archer MSAs, Coverdell ESAs, and ABLE accounts
- Payments to the United States, a state, the District of Columbia, a U.S. territory, or a foreign government
- Payments to or for homeowners from the HFA Hardest Hit Fund or a similar state program
- Payments by credit card, payment card, or third-party network
- Canceled debts
- Scholarships and fellowship grants
- Employee business expense reimbursements
- Nonemployee compensation paid to nonresident aliens
Other excluded payments
- PSO disability and survivor benefits: Compensation for injury or sickness paid by the Department of Justice as a public safety officer disability or survivor’s benefit, or under a similar state program.
- Wrongful incarceration compensation: Amounts excluded from income under section 139F.
- Informant awards: Payments for information about criminal activity made by government agencies or by 501(c)(3) organizations.
- Difficulty-of-care payments: Nontaxable payments for care of up to 10 qualified foster individuals under age 19, or up to 5 aged 19 or older, under section 131(c).
Note: When a state or local sales tax is imposed on the service provider and the business pays it to the provider, the tax is included in the 1099-NEC amount. When the tax is imposed on the business as the buyer, and the provider only collects it, the tax is not included.
What does a recipient do with Form 1099-NEC?
A recipient reports the income on their tax return whether or not a form arrives. Amounts reported in Box 1a that are paid to individuals are generally subject to self-employment tax.
A recipient who receives a form that should not have been issued, such as a corporation or an employee, or whose form shows the wrong amount, should contact the payer and ask for a corrected form.
Meet your 1099-NEC e-filing requirements with TaxBandits!
TaxBandits, an IRS-authorized e-file provider, lets you file Form 1099-NEC with the IRS and your state in one place. Import recipient details from W-9s collected through W-9 Manager, and TaxBandits checks each name and TIN with TIN Matching before you file. It can also print and mail recipient copies, deliver them online, or do both.
Frequently asked questions
The IRS looks at the working relationship, not the label on the paperwork. A worker is generally an employee when the payer controls what work is done and how it is done, and a contractor when the payer controls only the result. Pub. 15-A sets out the test. Learn more about independent contractors and W-2 vs. 1099.
Only from each business that paid them enough on its own. The threshold applies to the payments one payer makes to one payee, so a contractor paid smaller amounts by several clients may get no form from any of them. The contractor still reports all of the income.
Yes. The forms cover different payments. A payer that pays a person for services and also pays that person rent or a prize reports the services on Form 1099-NEC and the rent or prize on Form 1099-MISC.
No. The form reports a payment, and it does not decide a worker’s status. The facts of the working relationship decide, so a worker who is really an employee is still an employee after receiving a 1099-NEC.
The one the sole proprietor gives on Form W-9, either an SSN or an EIN. The IRS prefers the SSN for a sole proprietor, and the TIN must match the name on the form. The payer enters it exactly as provided. Explore More
The payer files a corrected return and furnishes a corrected copy to the recipient. For paper forms, the correction rules are in Pub. 1099, and the VOID box must not be checked on a correction. Electronic corrections go through the IRIS Application to Application system or the IRIS Portal.
Some do. A state may set its own filing rules, thresholds, or deadlines, in addition to the federal requirements. A payer should check the rules of each state where it paid contractors.
