1099 for $600 or More: Forms, Deadlines, and Penalties

If your business pays a non-employee $600 or more during the calendar year, you generally have to report those payments to the IRS on a 1099 form. The $600 is a running annual total for each payee, not a per-check limit, so a series of smaller payments to the same person can push you over the line. Payments for services go on Form 1099-NEC; rent, royalties, and certain other categories go on Form 1099-MISC.

How the $600 Threshold Actually Works

Add up everything you paid a single person or business across the entire calendar year. A freelance designer who received $200 in March, $150 in July, and $300 in November has crossed $600, and the full $650 is reportable. You don’t wait for one big invoice. You track running totals for every non-employee you pay.

The threshold only applies to payments made in the course of a trade or business. Paying a contractor $1,000 to remodel your personal kitchen creates no filing obligation. Paying the same contractor $1,000 to fix up a rental property does, because the payment ties to an income-producing activity.

One boundary worth flagging: not every payment category uses $600. Royalties trigger reporting at just $10. For most contractor and vendor situations, though, $600 is the number.

1099-NEC or 1099-MISC?

Starting with tax year 2020, the IRS separated non-employee compensation onto its own form. Putting a payment on the wrong form can generate penalty notices, so the split matters.

Form 1099-NEC

Use the 1099-NEC for payments of $600 or more to a non-employee for services: fees, commissions, and other compensation for work performed. It also includes travel reimbursements to contractors that weren’t documented under an accountable arrangement. If your contractor didn’t submit receipts and you just tacked a flat reimbursement onto their check, that amount goes into Box 1 with the rest of their pay.1Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025)

Attorney fees for legal services go in Box 1 of the 1099-NEC when they reach $600, even if the law firm is incorporated. That’s an exception to the general rule that payments to corporations don’t need reporting.2IRS. Instructions for Forms 1099-MISC and 1099-NEC (Rev. April 2025)

Form 1099-MISC

The 1099-MISC handles most other reportable categories:

The attorney distinction trips people up. Fees you pay a lawyer for representing your business go on the 1099-NEC. A settlement check you route through the plaintiff’s attorney goes on the 1099-MISC in Box 10. Two payments, two forms, two boxes.

Payments You Don’t Have to Report

Several common payment types don’t need a 1099 even when they clear $600.

Corporations

Payments to C-corporations and S-corporations, including LLCs that elect corporate tax treatment, are generally exempt. You confirm entity type by collecting a Form W-9 before you make the first payment. The big exception, again, is attorneys: fees and gross proceeds get reported regardless of the firm’s entity type.2IRS. Instructions for Forms 1099-MISC and 1099-NEC (Rev. April 2025)

Goods

The 1099 system tracks income, not purchases. Merchandise, inventory, office supplies, and other tangible goods you buy aren’t reportable.

Personal Payments

Purely personal payments fall outside the rules. A plumber you hire for your own bathroom is not a 1099 situation. The same plumber hired through your property management business to work on a client’s rental unit is.

Credit Cards and Platforms Like PayPal or Venmo

When you pay a contractor through a credit card processor or a third-party platform, the processor handles the reporting by issuing a Form 1099-K to the payee. You don’t file a 1099-NEC for the same payment; doing so would double-report the income.

Under the One, Big, Beautiful Bill signed into law in 2025, the 1099-K reporting threshold reverted to $20,000 in gross payments and more than 200 transactions per calendar year, replacing the lower $600 threshold that had been scheduled but repeatedly delayed.3Internal Revenue Service. IRS Issues FAQs on Form 1099-K Threshold Under the One, Big, Beautiful Bill; Dollar Limit Reverts to $20,000

If you pay a contractor through a mix of checks and credit cards, only the direct portion counts toward your 1099-NEC analysis. A contractor who received $500 by check and $700 by credit card gets no 1099-NEC from you: the direct portion is under $600, and the card portion belongs to the processor.

Get a W-9 Before You Pay

Before you cut the first check to any contractor or vendor, request a completed Form W-9. It gives you the payee’s legal name, address, taxpayer identification number, and tax classification. Without those, you can’t fill out a 1099 correctly at year-end.4IRS. Form W-9 (Rev. March 2024) The W-9 also tells you whether the corporate exemption applies. Skip this step and you’re guessing come January, and guessing wrong in either direction creates problems.

If a payee refuses to provide a W-9 or gives you a TIN that doesn’t match IRS records, you’re required to begin backup withholding at 24% on future payments and remit the withheld amounts using Form 945.5Internal Revenue Service. Backup Withholding If you should have withheld and didn’t, you become personally liable for the amount. Most contractors turn over a W-9 quickly once they hear the alternative.

The IRS also offers a TIN Matching service that lets you verify name-and-TIN combinations before you file. You need to be listed on the IRS Payer Account File to use it, but it’s worth the setup. Catching a mismatch in October beats getting a penalty notice the next summer.6Internal Revenue Service. Taxpayer Identification Number (TIN) Matching

Deadlines and How to File

The two forms have different due dates, which is one more reason the form-type decision matters.

When a deadline falls on a weekend or legal holiday, it shifts to the next business day.

If you file 10 or more information returns of any type during the year (W-2s, all varieties of 1099s, and other information returns combined), electronic filing is mandatory.7Internal Revenue Service. E-file Information Returns That’s a low bar most businesses will hit. The IRS still accepts submissions through FIRE (Filing Information Returns Electronically), but the replacement system, IRIS (Information Returns Intake System), is taking over. FIRE is targeted for retirement after filing season 2027, so businesses filing tax year 2026 returns should plan on IRIS.8Internal Revenue Service. Filing Information Returns Electronically (FIRE)

Filing fewer than 10 returns on paper? Include Form 1096 as a cover sheet totaling each batch, with a separate 1096 for each form type.9Internal Revenue Service. About Form 1096, Annual Summary and Transmittal of U.S. Information Returns Many states require 1099 filings too, either through the IRS Combined Federal/State Filing Program or by direct submission. Check with your state’s tax agency for the deadline, since state due dates don’t always mirror the federal ones.

Fixing a 1099 You Already Filed

Mistakes happen. Wrong dollar amount, transposed digit, wrong form. Correcting promptly can reduce or eliminate penalties.

For simple errors like an incorrect dollar amount or a wrong checkbox, prepare a new copy with the correct information and mark the “CORRECTED” box at the top. On paper, include a new Form 1096 as the transmittal. Don’t send a copy of the original wrong return.10Internal Revenue Service. General Instructions for Certain Information Returns

For deeper errors, meaning a wrong TIN, wrong payee name, or the wrong form type altogether, corrections take two steps. First, file a corrected return that zeroes out the original entry, with the “CORRECTED” box checked. Second, file a brand-new return with the right information as though it were an original, leaving the “CORRECTED” box unchecked. Both returns go to the IRS together, with a new Form 1096.10Internal Revenue Service. General Instructions for Certain Information Returns

One critical warning: never check the “VOID” box on a correction. VOID tells IRS scanning equipment to ignore the form entirely, so a correction marked VOID vanishes from IRS records.

Penalties for Late or Missing 1099s

The IRS charges penalties per form, and the amount grows the longer you wait. For returns due in 2026:11Internal Revenue Service. Information Return Penalties

  • Filed within 30 days of the due date: $60 per return
  • Filed after 30 days but by August 1: $130 per return
  • Filed after August 1 or not filed at all: $340 per return
  • Intentional disregard: $680 per return with no annual cap

For intentional disregard, the penalty is $680 or 10% of the amount that should have been reported, whichever is greater.12Office of the Law Revision Counsel. 26 US Code 6721 – Failure to File Correct Information Returns The IRS reserves this for cases where a business knowingly ignored the requirement rather than simply missed a deadline.

If you receive a penalty notice and think you had a legitimate reason for the failure, you can request relief by calling the number on the notice or submitting Form 843. The IRS evaluates reasonable cause case by case, looking at whether you acted responsibly before and after the failure and whether significant circumstances beyond your control contributed.13Internal Revenue Service. Penalty Relief for Reasonable Cause Support the request with documentation, not just an explanation.

Reimbursing a Contractor for Expenses

This is where a lot of businesses get tripped up. When you reimburse a contractor for travel, supplies, or other out-of-pocket costs, the tax treatment depends on how the reimbursement is documented.

If the contractor submits receipts with a clear business connection, the equivalent of what the IRS calls an accountable arrangement, the reimbursement generally isn’t reportable compensation. But if you just add a flat amount to the contractor’s payment without requiring documentation, the reimbursement counts as part of their compensation and must be included in the total on Form 1099-NEC. The IRS instructions specifically list unaccounted travel reimbursements as reportable nonemployee compensation.1Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025)

The practical takeaway: if you plan to reimburse a contractor, require itemized receipts and note the business purpose. Otherwise, roll the reimbursement into the 1099-NEC total and let the contractor deduct the expenses on their own return.