In most cases, banks do not get 1099s from the businesses and individuals that pay them. Banks are chartered as corporations, and the IRS treats corporations as exempt recipients for the payment categories that Forms 1099-NEC and 1099-MISC were built to capture.1eCFR. 26 CFR 1.6049-4 – Return of Information as to Interest Paid A short list of payment types overrides that exemption, and getting those wrong is where filers run into penalties.
Why the Corporate Exemption Applies to Banks
Nearly every bank operating in the United States is a chartered corporation, and that single fact controls the answer. Under Treasury regulations, corporations are “exempt recipients” for most information-return reporting. If you paid an unincorporated financial consultant $3,000 in fees, you would owe them a 1099-NEC. Pay a bank the same $3,000 in account or service fees and no 1099 is required. The exemption reaches non-employee compensation, rents, prizes, and the other broad categories these forms cover.2Internal Revenue Service. 2025 General Instructions for Certain Information Returns
It helps to keep the direction of reporting straight. Banks issue enormous volumes of 1099s themselves — 1099-INT for interest paid on deposits, 1099-DIV for dividends, 1099-C for cancelled debt, 1098 for mortgage interest. Those forms flow from the bank out to you. The question of whether you send a 1099 to the bank runs the opposite direction, and the answer usually stops at the corporate exemption.
How Form W-9 Documents the Exemption
The corporate exemption only helps if you can show the payee actually is a corporation. That is what Form W-9 is for. When you onboard a vendor, you request a W-9 to collect the taxpayer identification number and federal tax classification. On line 3a, the payee checks its entity type. A bank checks the corporation box (or the C or S corporation designation if it is an LLC taxed as one).3Internal Revenue Service. Instructions for the Requester of Form W-9
Once you hold a W-9 showing corporate status, you can rely on it unless you know it is wrong. Corporations sit at exempt payee code “5,” which relieves you from issuing 1099s for payments reportable under Sections 6041 and 6041A of the tax code.3Internal Revenue Service. Instructions for the Requester of Form W-9 If a payee refuses to provide a W-9 or fails to supply a TIN, backup withholding at 24% applies to any reportable payments.4Internal Revenue Service. Backup Withholding Due to a Missing Payee TIN Banks deal with W-9 requests routinely and hand them over without friction.
Payments to Banks That Still Require a 1099
The corporate exemption has carve-outs. A handful of payment types must be reported even when the payee is a corporation, and a few of these can plausibly involve a bank.2Internal Revenue Service. 2025 General Instructions for Certain Information Returns
Attorney Fees for Legal Services
Payments to a corporation for legal services go on Form 1099-NEC. The IRS instructions are explicit that the corporate exemption does not apply to legal-service payments.5Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC Banks are not law firms, but a bank’s trust or legal department could provide legal services in a form that triggers this rule.
Gross Proceeds Paid to an Attorney
Under Section 6045(f) of the tax code, gross proceeds paid to an attorney are reported on Form 1099-MISC in box 10.6Office of the Law Revision Counsel. 26 USC 6045 – Returns of Brokers If your business settles a lawsuit and the settlement check goes to the bank’s attorney, you report the gross amount on a 1099-MISC to the attorney. If the check goes directly to the bank as claimant and the bank is not itself providing legal services, the corporate exemption still covers it.
Substitute Payments in Securities Lending
When a borrower of securities makes a substitute payment to a lender in place of a dividend or tax-exempt interest the lender would have received, the payer reports it on Form 1099-MISC box 8, even if the lender is a corporation.2Internal Revenue Service. 2025 General Instructions for Certain Information Returns Banks that participate in securities lending routinely receive these forms. This is an institutional matter and rarely something a typical small business will encounter.
Medical and Health Care Payments
Medical and health care payments to corporations are reportable on Form 1099-MISC box 6. This one almost never applies to a bank in practice, but it sits on the same list of exceptions for anyone auditing their vendor file.
Ordinary Banking Transactions Never Trigger a 1099
Paying your mortgage, making a loan payment, wiring funds, depositing cash, or absorbing account fees are not the kinds of payments the 1099 system was built for. These are financial transactions between a customer and a bank, not payments to a service vendor. You owe no 1099 to your bank for interest charged on a loan, for automatic account fees, or for principal repayments.
The bank does its own reporting on transactions like these. It sends you a 1098 for mortgage interest you paid. It sends a 1099-INT for interest it paid you. It sends a 1099-C if it forgives a debt. None of that flows the other direction. The only time you might owe a 1099 to a bank is when the bank steps outside its usual role and provides one of the services listed in the carve-outs above.
What About 1099-S When a Bank Sells Foreclosed Property
A common assumption is that closing agents file 1099-S when a bank sells a foreclosed home. They do not. The instructions for Form 1099-S specifically exclude transactions where the transferor is a corporation, and that definition covers associations, joint-stock companies, and insurance companies. Because banks are corporations, the closing agent does not issue a 1099-S when the bank is the seller. If a transaction has both exempt and nonexempt sellers, the 1099-S goes only to the nonexempt one.7Internal Revenue Service. Instructions for Form 1099-S The bank handles gain or loss on its own corporate return.
Penalties If You Skip a 1099 You Owed
When one of the carve-outs applies and you fail to file, the penalties are tiered by how late the return is. For 2026 amounts:8Internal Revenue Service. Information Return Penalties
- Filed within 30 days of the deadline: $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.
Annual caps limit good-faith corrections at $500,000 within 30 days, $1,500,000 by August 1, and $3,000,000 overall. Smaller filers with gross receipts of $5,000,000 or less have lower caps of $175,000, $500,000, and $1,000,000.9Office of the Law Revision Counsel. 26 USC 6721 – Failure to File Correct Information Returns A parallel structure under Section 6722 penalizes failure to furnish the recipient copy.10Office of the Law Revision Counsel. 26 USC 6722 – Failure to Furnish Correct Payee Statements
Intentional disregard is where the numbers get punishing. The penalty is $680 per return or 10% of the reportable amount, whichever is greater, with no annual ceiling. On a large legal settlement routed through a bank’s attorney, 10% of gross proceeds can dwarf the flat $680.
Form 1099-NEC is due to both the IRS and the recipient by January 31. Recipient copies of 1099-MISC are generally due January 31 as well, with the IRS copies due February 28 on paper or March 31 electronically; box 8 and box 10 amounts push the recipient deadline to February 15.11Internal Revenue Service. 2026 Publication 1099 Any filer with 10 or more information returns in a calendar year must file electronically.12Internal Revenue Service. E-File Information Returns
For most payers, the practical takeaway is short. Collect a W-9 from any vendor that could conceivably be reportable, including your bank. If the W-9 shows corporate status, ordinary payments to that bank need no 1099. Watch the narrow set of exceptions — legal services, gross proceeds through an attorney, and securities-lending substitute payments — and file when one of those actually applies.