Do You Need to Issue a 1099? 1099-NEC & 1099-MISC Explained.

Many business owners don’t quite understand their responsibilities as it relates to issuing 1099s (1099-NEC OR 1099-MISC) so in this video I am going to clarify this and answer the question…Does your business need to issue a 1099?

1099-NEC

Anytime your business pays an individual or another business (such as a sub-contractor) for services (not products), and that individual or other business is not an employee of yours (meaning they are not on your payroll and will not receive a W-2 from your business), you may be responsible for issuing them a 1099-NEC.

Above, I used the word “may” because there is a list of notable exceptions where you do not need to issue a 1099-NEC – see below:

1. You paid them less than $600 during a calendar year.
2. You paid them via credit card or debit card (the card issuer will report these payments on Form 1099-K).
3. You paid them via a third-party payment network (TPPN) such as PayPal, Venmo or Cash App as long as you confirm with the TPPN that you are sending business payments correctly on the TPPN platform. For example, for PayPal and Venmo, you should setup a business account with them and select the "goods and services" option when sending payments. For Cash App, you should setup a "Cash for Business" account to send payments and not use a "Cash App" personal account for business payments. If setup properly, the TPPN will report the payments on Form 1099-K.
4. Their business (LLC or Corporation) is taxed as an S or C-Corporation. (If you paid a lawyer/attorney, you still need to issue them a 1099-NEC even if they are taxed as an S or C-Corp...the IRS doesn't trust attorneys for some reason).
5. They do not live in the U.S. and do not perform their services in the U.S.
6. They sell merchandise, freight, storage or similar items from them (and therefore, they did not perform a service for your business)

Hopefully, after reading the list of exceptions above, your worries have subsided. That said, let me provide a list where you actually might need to issue a 1099-NEC:

You paid an individual or a business more than $600 via cash, check, wire transfer, ACH or Zelle and you don’t know if that individual or business is taxed as an S or C-Corp.

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#1099 #1099NEC #1099MISC