In most cases, incorporated companies do not need a 1099. The IRS exempts payments to C-corporations and S-corporations from Form 1099-NEC and Form 1099-MISC reporting for the ordinary services businesses buy every day.1Internal Revenue Service. Information Returns (Forms 1099) But the exemption has real exceptions, and the entity that looks incorporated on its invoice may not actually be a corporation for tax purposes. Both problems are worth understanding before you decide to skip a filing.
Why Corporations Are Generally Exempt
When your business pays an unincorporated vendor $600 or more during a calendar year for services, you generally have to report the payment on Form 1099-NEC.2Internal Revenue Service. Am I Required to File a Form 1099 or Other Information Return? That obligation covers individuals, sole proprietors, partnerships, and most LLCs.
Corporations get a pass on most payment types. C-corps file Form 1120 and S-corps file Form 1120-S, so the IRS already has a direct return from the recipient and does not need a matching information return from the payer. This is why consulting fees, contractor invoices, software work, marketing services, and rent paid to an incorporated landlord typically require no 1099. If the vendor’s Form W-9 shows a corporate classification, those payments come off your 1099 list.
Payments That Require a 1099 Even to a Corporation
The exemption is broad but not universal. A few payment categories must be reported no matter what kind of entity you paid.
Legal Fees
Any payment of $600 or more to an attorney or law firm for legal services goes on Form 1099-NEC, box 1, even if the firm is a professional corporation.3Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (Rev. April 2025) This is the exception businesses run into most often.
Gross proceeds paid to an attorney follow a different rule. When you send money to a lawyer that is not their fee but funds connected to a legal matter (a settlement, for example), you report the payment on Form 1099-MISC, box 10, not on the NEC. If an insurer pays $100,000 to a plaintiff’s attorney to settle a claim, the full amount is gross proceeds on the MISC.
Medical and Health Care Payments
Payments of $600 or more to a physician, hospital, or other health care provider go on Form 1099-MISC, box 6, even when the provider is incorporated. Employers paying medical providers directly and insurers making payments under accident and sickness programs are the common filers here. Payments to tax-exempt hospitals and to hospitals owned and operated by the federal or state government are carved out.3Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (Rev. April 2025)
Cash Payments for Fish Purchased for Resale
If your business buys fish for resale, cash payments of $600 or more to anyone in the business of catching fish are reported on Form 1099-MISC, box 11, regardless of the seller’s corporate status. This is a narrow rule that mostly affects seafood distributors and restaurants buying directly from commercial fishing operations.
The LLC Problem: Incorporated Is Not What You Think
The word “incorporated” is where a lot of 1099 mistakes start. An LLC is a state-level legal structure, not a federal tax classification. The IRS treats an LLC according to how it has elected to be taxed, not according to what the state calls it.
By default, a single-member LLC is treated as a sole proprietorship and a multi-member LLC is treated as a partnership. In both defaults, payments of $600 or more for services require a 1099-NEC.4Internal Revenue Service. Reporting Payments to Independent Contractors An LLC can elect corporate treatment by filing with the IRS, and only then does the corporate exemption apply.
The practical result: a vendor invoicing you as “Acme Consulting LLC” tells you nothing about whether you owe them a 1099. You need the W-9.
How to Confirm Status With Form W-9
Form W-9 is the compliance tool that decides the question. Request one from every non-employee vendor before you pay them.1Internal Revenue Service. Information Returns (Forms 1099) Box 3, “Federal tax classification,” is the box that matters:
- C Corporation or S Corporation checked: no 1099 required for ordinary service payments; legal fees, medical payments, and fish purchases still trigger a filing.
- Individual or sole proprietor checked: 1099-NEC required once payments reach $600 for the year.
- Partnership checked: 1099-NEC required at the $600 threshold.
- LLC with tax classification “D” (disregarded) or “P” (partnership): 1099-NEC required at $600.
- LLC with tax classification “C” or “S”: treat as a corporation; same exemption and same exceptions.
Do not skip the W-9 because a vendor looks like a “real company.” Many businesses that present as corporate are LLCs taxed as partnerships or sole proprietorships, and the assumption is where the penalty exposure sits.
Before filing, you can run vendor names and taxpayer identification numbers through the IRS’s free TIN Matching service, which offers interactive and bulk options.5Internal Revenue Service. Taxpayer Identification Number (TIN) Matching Catching a mismatch before you file is cheaper than fixing it after the IRS sends a CP2100 notice.
When Payment Method Removes the Obligation
Even when a payment would otherwise require a 1099-NEC, you do not issue one if you paid the vendor by credit card, debit card, or through a third-party payment network such as PayPal or Venmo for Business. Those transactions get reported by the processor on Form 1099-K, and IRS rules prohibit reporting the same transaction on both forms.6Internal Revenue Service. Form 1099-K FAQs: Third Party Filers of Form 1099-K
Only payments made by check, cash, ACH bank transfer, or wire transfer remain your responsibility to report. If you pay most vendors through card networks or covered payment apps, the universe of payments that even reach the corporate-exemption question shrinks considerably.
What Getting It Wrong Costs
The IRS charges per-return penalties for failing to file correct information returns, and the amounts climb the longer the problem goes unfixed:7Internal 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: $340 per return.
- Intentional disregard: $680 per return.
The penalties apply separately to each missing or incorrect return, and the same schedule applies to incorrect recipient statements. Small businesses with average annual gross receipts of $5 million or less face reduced maximum aggregate penalties, but the per-return amounts do not change.
The failure pattern in this area is almost never sending a 1099 to a corporation that did not need one. It is the reverse: assuming a vendor was incorporated, skipping the filing, and finding out after the deadline that the entity was actually a partnership or a sole proprietor. A W-9 collected before the first check eliminates that risk.
One further consequence to be aware of: if a vendor refuses to provide a W-9, supplies an obviously wrong TIN, or the IRS notifies you of a name/TIN mismatch, you must begin backup withholding of 24% on reportable payments to that vendor.8Internal Revenue Service. Publication 15 (2026), (Circular E), Employer’s Tax Guide That obligation applies to payments to corporations too when the TIN is invalid, which is another reason to collect a clean W-9 at the start of the relationship rather than at year-end.