Do Incorporated Businesses Get a 1099? Exceptions and Penalties

Payments to a corporation usually don’t require a 1099. If the vendor you paid is a C-corporation or an S-corporation, you can generally skip issuing Form 1099-NEC or 1099-MISC, even when the payments for the year total well over $600.¹ So do incorporated businesses get a 1099? Only in a short list of situations, and those exceptions are where most filers get into trouble.

The General Rule

When you pay a non-employee at least $600 for services in a year, the default rule is that you report the payment on Form 1099-NEC.² Corporations are carved out of that default. The IRS does not require a 1099-NEC for service payments to a C-corp or S-corp because those entities file their own corporate returns on Form 1120 or 1120-S.³

The same carve-out generally applies to Form 1099-MISC. Rent, royalties, and most other 1099-MISC categories don’t need to be reported when the recipient is a corporation, unless the payment falls into one of the specific exceptions below.⁴

Tax-exempt organizations under Section 501(c) and government entities at the federal, state, and territorial level are also exempt from 1099-NEC and 1099-MISC reporting.³ Hire a 501(c)(3) nonprofit to run a training session, and no 1099 is required regardless of the amount.

How To Confirm a Vendor Is Actually Incorporated

What matters is federal tax classification, not what the business calls itself. A company can register articles of incorporation with a state and still be taxed as something else at the federal level. The reliable way to know is Form W-9.

Collect a completed W-9 from every vendor you expect to pay $600 or more for services, before you send the first check.⁵ Line 3a is where the vendor checks their federal tax classification: individual, C-corporation, S-corporation, partnership, or trust.⁶ If the box says C or S Corporation, you have your documentation that the corporate exemption applies.

The LLC Trap

An LLC is a state-law entity that can wear different tax hats. A single-member LLC with no special election is treated as a sole proprietorship for federal tax purposes, so you must issue a 1099-NEC once payments reach $600.¹ A multi-member LLC defaults to partnership treatment, and partnerships also receive 1099s.

But an LLC that has elected to be taxed as a C-corp or S-corp is treated as incorporated for 1099 purposes, so the exemption applies.³ You cannot tell from a company’s name whether an LLC made that election. The W-9 is the only reliable source. If a vendor won’t return one, the IRS requires you to begin backup withholding at 24 percent on future payments to that vendor.⁷

When a Corporation Still Gets a 1099

The corporate exemption has a short list of exceptions. In each of these, the recipient’s corporate status is irrelevant: you file the 1099 anyway.

Payments to Attorneys

Every payment for legal services gets reported. Pay a law firm $600 or more for hourly fees, retainer work, or any other legal service, and the amount goes in Box 1 of Form 1099-NEC, even if the firm is a professional corporation.³ This is the exception that catches the most businesses off guard, because it flatly overrides the corporate rule.

A separate obligation applies to gross proceeds paid to an attorney in connection with a legal settlement. Under IRC Section 6045(f), when $600 or more passes through an attorney in connection with legal services, you report the total in Box 10 of Form 1099-MISC, regardless of how much the attorney keeps as fees.⁸ Both reports can apply to the same transaction: Box 1 of 1099-NEC for the fee portion, Box 10 of 1099-MISC for the total proceeds routed through the attorney.⁹

Medical and Health Care Payments

Payments of $600 or more to any provider of medical or health care services must be reported in Box 6 of Form 1099-MISC, even when the provider is incorporated.⁹ Corporate radiology groups, physical therapy clinics organized as professional corporations, and similar entities all get a 1099. The obligation falls on any business, health insurer, or government agency making payments directly to the provider.

Federal Executive Agency Payments

Federal agencies operate under a stricter standard. When a federal executive agency pays a corporation for services, the payment is reported on Form 1099-NEC regardless of the recipient’s corporate status.¹⁰ Government contractors should expect a 1099-NEC even if they are incorporated.

Fish Purchases and Substitute Payments

Two narrower exceptions round out the list. Cash payments to a corporation for the purchase of fish for resale (Box 11) and substitute payments in lieu of dividends or tax-exempt interest (Box 8) must be reported on 1099-MISC regardless of corporate status.³

A Note on Foreign Corporations

Payments to foreign corporations for U.S.-source income fall outside the 1099 system entirely. You collect Form W-8BEN-E, withhold at 30 percent unless a treaty reduces it, and report on Form 1042-S. The rules discussed here apply only to domestic entities.

Card and Payment-App Payments Don’t Count

Here’s a rule that trips up bookkeepers even when the vendor is unincorporated: if you paid a vendor through a credit card, debit card, or a third-party network like PayPal or Venmo, you do not issue a 1099-NEC or 1099-MISC for that payment. The payment settlement entity handles the reporting on Form 1099-K.⁹

When you total payments to decide whether a vendor crosses the $600 threshold, exclude anything paid by card or through a payment network. Only checks, cash, ACH transfers, and wire payments count. Double-reporting the same payment on both a 1099-NEC and a 1099-K is one of the more common filing errors the IRS sees.

What Happens If You Skip One You Owed

Guessing that a vendor is incorporated and skipping a 1099 you actually owed carries inflation-adjusted penalties for 2026 that scale with how late the return is:¹¹

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

Large businesses with average annual gross receipts above $5 million face a ceiling of $4,098,500 per year at the highest standard tier. Small businesses at or below that receipts figure get a reduced cap of $1,366,000.¹² A parallel penalty applies under Section 6722 for failing to furnish the correct statement to the payee, so a single missed return usually costs twice.

The businesses that get hit rarely made a deliberate choice. They just didn’t have the W-9 on file when January rolled around, and by then the vendor had stopped answering emails. Get the W-9 before the first check clears, read line 3a, and the corporate question answers itself.

1
Internal Revenue Service. Am I Required to File a Form 1099 or Other Information Return
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Internal Revenue Service. Reporting Payments to Independent Contractors
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Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (Rev. April 2025)
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Internal Revenue Service. Information Returns (Forms 1099)
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Internal Revenue Service. About Form W-9, Request for Taxpayer Identification Number and Certification
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Internal Revenue Service. Instructions for the Requester of Form W-9 (03/2024)
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Internal Revenue Service. Backup Withholding
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Office of the Law Revision Counsel. 26 USC 6045 – Returns of Brokers
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Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025)
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Internal Revenue Service. Information Return Reporting for Federal Agencies
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Internal Revenue Service. Information Return Penalties
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Internal Revenue Service. Revenue Procedure 2024-40