Who Actually Needs a 1099 (And Who Doesn’t)
Every January, the same question shows up for small business owners:
“Do I need to send a 1099 for this?”
Some people send too many and create unnecessary work. Others miss required forms and panic when they realize they may be late.
Let’s clear this up in plain language so you know exactly who needs a 1099 and who does not.
What is a 1099 (In Simple Terms)?
A 1099 is a form used to report payments your business made to certain non-employees.
It tells the IRS, “We paid this person for work, and they should be reporting this income on their tax return.”
If you paid someone to help your business and they were not an employee, a 1099 may be required.
Who You DO Need to Send a 1099 To
In most cases, you need to send a 1099-NEC if all of the following are true:
You paid a person or business for services
The payment was for business purposes
You paid them $600 or more during the year
They are not your employee
They are a sole proprietor, partnership, or LLC taxed as one of those
Common examples include:
Freelancers
Independent contractors
Virtual assistants
Marketing consultants
Designers and developers
Coaches
Handymen or tradespeople
If you hired them to perform work for your business, a 1099 is usually required.
Who You Do NOT Need to Send a 1099 To
This is where most of the confusion comes in.
You generally do not need to send a 1099 to:
Corporations
If the vendor is a C Corporation or S Corporation, a 1099 is usually not required.
There are exceptions, but this rule alone eliminates a lot of unnecessary forms.
Employees
Employees receive a W-2, not a 1099.
If you control how and when they work, they should not be receiving a 1099 at all.
Vendors Paid Only for Products
Buying goods does not require a 1099.
Examples:
Office supplies
Inventory
Equipment
Physical products
1099s are for services, not products.
Payments Made Through Credit Cards or Third-Party Processors
If you paid someone through PayPal, Stripe, Square, Venmo, or another processor, you typically do not issue a 1099.
Those platforms handle reporting separately.
This is one of the most common misunderstandings every year.
Rent Paid to Property Managers
If you pay rent through a property management company, they handle reporting. You usually do not issue the 1099 yourself.
What About Lawyers and Accountants
This one surprises people.
Attorney payments often do require a 1099, even if the law firm is a corporation.
Accounting and bookkeeping services are usually exempt if the firm is incorporated, but it depends on how they are structured.
This is a good example of why collecting a W-9 upfront matters.
Why Getting 1099s Right Matters
Sending incorrect 1099s wastes time and creates confusion.
Failing to send required 1099s can lead to:
IRS penalties
Notices and follow-up letters
Extra work fixing mistakes after the deadline
Getting it right the first time saves stress and keeps your books clean.
The Easiest Way to Avoid 1099 Problems
The best system is simple:
Collect a W-9 before paying contractors
Track contractor payments correctly in your books
Review totals early in January
File on time with accurate information
Most 1099 mistakes happen because bookkeeping was behind or inconsistent during the year.
Final Thoughts
If you paid people to help your business, there’s a good chance 1099s are part of the picture. Knowing who needs one and who does not removes a lot of unnecessary anxiety.
If you want help reviewing contractor payments, cleaning up your books, or making sure your 1099s are handled correctly, learning more is the next step.
At Red Leaf Bookkeeping, we help small business owners stay compliant without stress.
To learn more about how we work and book a call when you’re ready, visit redleafbookkeeping.com.