1099 FAQs Answered: Who Gets One and Why It Matters

It’s that time of year again—1099 season! For many business owners, filing 1099s feels like a never-ending maze of rules, exceptions, and paperwork. But don’t worry, I’ve got you covered. Let’s break down the essentials so you can file with confidence and keep the IRS off your back. Here’s what you really need to know.

What is a 1099, and Why Does It Matter?

A 1099 form is how you report payments you’ve made to non-employees, like independent contractors, freelancers, and other service providers. It’s the IRS’s way of making sure those folks report their income, and it’s your responsibility to file it if you’ve met the requirements. Messing this up can lead to penalties—and no one wants that.

Who Needs a 1099?

Here’s the simple rule: You need to send a 1099-NEC to anyone you paid $600 or more in a year for services related to your business. That includes:

Independent contractors and freelancers.
Sole proprietors and single-member LLCs.
Partnerships (yes, partnerships count too!).

You’re off the hook if the payee is:

A corporation (except attorneys—they always get one).
Paid via credit card or payment apps like PayPal or Venmo (those are reported on 1099-K).

What About Special Cases?

Lawyers: Even if they’re incorporated, lawyers get a 1099-NEC for legal services. If you paid a lawyer as part of a settlement, that goes on a 1099-MISC instead.
Nonprofits: Nonprofits might seem exempt, but if they’re not incorporated, you’ll still need to issue a 1099 for services.
Uncashed Checks: If you wrote a check in 2024 but the payee didn’t cash it until 2025, it still goes on the 2024 1099. The IRS considers the payment made when the check is issued, not when it’s cashed.

What Types of Payments Are Included?

You’ll issue a 1099-NEC for:

Fees for services (e.g., consulting, marketing, design work).
Professional services (e.g., legal, accounting, or engineering work).
Payments to non-employees who helped your business run smoothly.

But you don’t need to include:

Goods, merchandise, or physical products.
Rent (that’s a 1099-MISC if applicable).
Payments made via third-party processors like credit cards (covered under 1099-K).

How Do You File a 1099?

Gather the Details: You’ll need the recipient’s name, address, and Taxpayer Identification Number (TIN). If you don’t already have a W-9 form on file, now’s the time to ask for one.
Complete the Form: Fill out Form 1099-NEC for each qualifying payee. Make sure you report payments for the correct tax year.
Send Copies: Provide Copy B to the recipient by January 31. Send Copy A to the IRS (either electronically or by mail) by the same date.

Do States Like Kentucky Require 1099s?

Maybe! Some states require you to file 1099s if state income tax was withheld. For example, in Kentucky, you only need to file 1099s with the state if you withheld Kentucky state taxes. No state tax withheld? No state filing is required. Check your state’s rules to be sure.

Why Is This So Important?

Filing 1099s correctly ensures you stay in compliance with the IRS. Plus, it’s just good business practice. Your contractors rely on these forms to report their income accurately, and it helps build trust and transparency in your professional relationships.

Final Thoughts

1099s don’t have to be a headache. By knowing who gets one, what payments to include, and how to file properly, you can breeze through tax season. Still feeling unsure? Reach out, and we’ll help you untangle the details. You’ve got this!