Do C Corps Get a 1099: Exceptions, Verification, and Penalties

Do C corps get a 1099? Generally no — payments to a C corporation for services are exempt from Form 1099 reporting. But the exemption has real holes: legal fees, medical and health care payments, cash paid for fish bought for resale, substitute dividend payments, and federal agency service payments must be reported even when the recipient is a C corporation. Miss one of those and the penalty starts at $60 per form.

The General Rule and Why It Exists

If you pay a C corporation $600 or more for services in a calendar year, you typically do not need to issue a 1099. The IRS states it directly: you are not required to file an information return when “the payment was made to another business that is incorporated, but was not for medical or legal services.”¹

The reasoning is administrative. C corporations report their income on Form 1120, the U.S. Corporation Income Tax Return, so the IRS already sees the money flowing in through the corporate side.² Duplicate reporting through 1099s would be noise. The way you confirm a vendor is actually a C corporation is Box 3 of the Form W-9 they give you — if the C Corporation box is checked, the general exemption applies.

S corporations get the same treatment as C corporations for routine service payments, and the same exceptions apply to both.³

Payments to a C Corp That Still Require a 1099

The exceptions are narrow, but each one overrides the corporate exemption completely. If a payment fits any of the categories below, you file the 1099 regardless of how the vendor is organized.

Legal Services

This one catches more businesses than any other. Every payment for legal services to a corporation must be reported. The IRS instructions are explicit: “The exemption from reporting payments made to corporations does not apply to payments for legal services.”³

Two reporting paths exist. Attorney fees for the lawyer’s own services — the bill from your corporate law firm for drafting a contract or handling a matter — go on Form 1099-NEC, Box 1, at $600 or more. Gross proceeds paid to an attorney in connection with legal services, but not as compensation for the attorney’s work (settlement funds routed through a law firm, for example), go on Form 1099-MISC, Box 10.³ A single settlement can generate both: a 1099-MISC to the attorney for gross proceeds and a separate 1099-MISC to the claimant for the damages.

Medical and Health Care Payments

Payments of $600 or more for medical or health care services go on Form 1099-MISC, Box 6, even when the provider is a C corporation. The IRS instructions say this reporting requirement applies to “corporations, including professional corporations.”³ Paying an incorporated medical practice, physical therapy clinic, or hospital directly for employee health services triggers the reporting requirement.

Cash Payments for Fish Purchased for Resale

If your business buys fish for resale, cash payments totaling $600 or more to anyone in the trade of catching fish go on Form 1099-MISC, Box 11 — corporations included. The IRS defines “fish” broadly to cover all aquatic life, and “cash” includes cashier’s checks, bank drafts, and money orders in addition to currency.⁴

Substitute Payments in Lieu of Dividends or Tax-Exempt Interest

Substitute payments in lieu of dividends or tax-exempt interest paid to a corporation must be reported on Form 1099-MISC, Box 8.⁴

Federal Executive Agency Payments

Federal executive agencies that pay corporations for services report those payments on Form 1099-NEC, Box 1.⁴ This applies only to federal payors, not to private-sector businesses paying a corporate vendor.

Payment Cards and Payment Apps Are Handled Separately

One boundary worth stating: if you paid your C corp vendor by credit card, debit card, or through a third-party settlement organization like a payment app, you do not issue a 1099 for that payment at all. The payment processor reports it on Form 1099-K.⁵ That’s true whether the vendor is a corporation, an LLC, or a sole proprietor. The corporate exemption question only comes up for payments you made directly by check, ACH, or cash.

Confirming C Corp Status Before You Skip the 1099

Before deciding a vendor is exempt, get a completed Form W-9 on file. Box 3 — Federal Tax Classification — is the only reliable way to know how the vendor is taxed. A vendor’s business name and state registration do not tell you this. “Smith Consulting, Inc.” might be a C corporation, an S corporation, or an LLC that never made a corporate tax election.

LLCs are where mistakes cluster. An LLC’s 1099 status depends entirely on its tax election, not on the “LLC” in its name. A single-member LLC that hasn’t elected corporate treatment is a disregarded entity, and you must send it a 1099-NEC for services. A multi-member LLC without a corporate election is a partnership, and the same rule applies. Only an LLC that has elected to be taxed as a C or S corporation gets the corporate exemption. On the W-9, an LLC checks a single box on Line 3a and writes in C, S, or P to indicate its classification.⁶ That letter decides whether a 1099 goes out.

If a vendor won’t give you a W-9, the fallback isn’t to guess they’re a corporation. You’re required to withhold 24% of each payment as backup withholding and remit it to the IRS.⁷ You still file a 1099-NEC at year-end using whatever information you have.

What It Costs to Guess Wrong

The IRS charges a per-form penalty for each information return you fail to file correctly or on time, plus a separate per-form penalty for each payee statement you don’t furnish. For returns due in 2026:⁸

Up to 30 days late: $60 per form
31 days late through August 1: $130 per form
After August 1 or never filed: $340 per form
Intentional disregard: $680 per form, with no cap

Annual aggregate caps apply to the first three tiers, with lower maximums for small businesses averaging under $5 million in gross receipts over the prior three tax years. Intentional disregard has no ceiling.⁸ And the two penalties stack: missing the IRS filing and the recipient copy on the same form counts as two failures.

Because the exceptions cover categories many businesses use routinely — outside counsel, occupational health providers, medical clinics — the safer default is to collect a W-9 from every vendor before the first payment, note the classification, and flag any legal or medical payor for reporting regardless of what Box 3 says. Form 1099-NEC is due to both recipients and the IRS by January 31; Form 1099-MISC recipient copies are due January 31, except gross proceeds paid to attorneys in Box 10, which are due February 15.⁹Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025)

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Internal Revenue Service. Am I Required to File a Form 1099 or Other Information Return?
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Internal Revenue Service. About Form 1120, U.S. Corporation Income Tax Return
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Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
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Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025)
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Internal Revenue Service. Understanding Your Form 1099-K
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Internal Revenue Service. Instructions for the Requester of Form W-9
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Internal Revenue Service. Backup Withholding
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Internal Revenue Service. Information Return Penalties
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