If you run a small business, you’ve probably encountered Form 1099 at some point.
Maybe you hired a freelancer. Maybe your business paid a contractor $8,000. Maybe your accountant asked for a stack of W-9s at the end of the year.
And then there’s the classic question:
“Do I have to send this person a 1099?”
The answer depends on several factors, including what you paid for, how much you paid, and how the recipient is taxed.
It also matters whether your business is a sole proprietorship, partnership, S corporation, C corporation, or LLC—and, importantly, how that LLC is taxed.
Here’s how the rules work for 2026 and beyond.
What is a 1099?
A 1099 isn’t one particular tax form. It’s a family of information returns that businesses use to report certain types of payments to the IRS and to the person or business that received the money.
For small businesses, the two forms you’ll encounter most often are:
Form 1099-NEC: Generally used to report payments for services performed by someone who isn’t your employee.
Form 1099-MISC: Used for various other types of payments, including certain rents, royalties, prizes, medical payments, and payments to attorneys.
And here’s an important 2026 update:
The 1099-NEC Threshold Is Now $2,000
For payments made after December 31, 2025, the federal reporting threshold for many 1099-NEC payments increased from $600 to $2,000.
So, for example, if your business pays an independent contractor $2,500 for services during 2026, that payment will generally be reportable on Form 1099-NEC, assuming the other requirements are met.
If you pay that contractor $1,500, the federal 1099-NEC reporting threshold generally isn’t met.
There are exceptions and different thresholds for other types of payments, so don’t apply the $2,000 figure to every 1099 form.
Does Your Business Structure Matter?
Yes—but probably not in the way you think.
The 1099 rules generally care about who received the payment and what kind of entity they are for tax purposes, not simply whether the business has “LLC” at the end of its name.
For example, an LLC can be taxed as:
- A disregarded entity (usually a single-member LLC)
- A partnership
- An S corporation
- A C corporation
Those classifications can produce different 1099 reporting results.
That’s why asking, “Is this vendor an LLC?” isn’t enough.
You need to know how the vendor is taxed.
Do S Corporations Receive 1099s?
Generally, payments for ordinary business services made to an S corporation are not subject to the usual 1099-NEC reporting requirement simply because the corporation provided services.
Corporations generally receive an exception from many information-reporting requirements.
But that exception isn’t universal.
For example, payments to corporations for legal services are generally reportable. Payments for certain medical and health care services are also reportable even when the provider is a corporation. (irs.gov)
So if your S corporation hires another S corporation to provide $10,000 of ordinary consulting services, you generally don’t issue a 1099-NEC solely because of that payment.
If your S corporation pays a corporation for legal services, however, a 1099 may be required.
Do S Corporations Need to Issue 1099s?
Absolutely.
Being an S corporation doesn’t give your business a blanket exemption from issuing 1099s.
Suppose your S corporation hires:
- A freelance graphic designer
- A self-employed web developer
- An independent consultant
- A non-corporate electrician
- A freelance writer
If you pay a qualifying service provider at or above the applicable reporting threshold during the year, you may need to issue a 1099-NEC.
The fact that your business is an S corporation doesn’t change that.
Think of it this way:
Your entity type doesn’t determine whether you have to issue 1099s. The payment and the recipient’s tax status do.
What About LLCs?
This is where things get confusing.
An LLC is a legal entity, not necessarily a tax classification.
Single-Member LLCs
A single-member LLC is generally treated as a disregarded entity for federal income-tax purposes unless the owner elects corporate taxation.
If you pay a single-member LLC $2,500 for qualifying services, you generally may need to issue a 1099-NEC.
The important point is that you’re generally reporting the payment to the owner’s tax identity, not treating the LLC as a corporation simply because it has an LLC designation.
This is one reason the vendor’s Form W-9 is so important.
Multi-Member LLCs
A multi-member LLC is generally treated as a partnership for federal income-tax purposes unless it elects to be taxed as a corporation.
Payments for qualifying services to a partnership generally can be reportable on Form 1099-NEC once the applicable threshold is reached.
LLCs Taxed as S Corporations
If an LLC has elected to be taxed as an S corporation, it generally follows the corporation rules for 1099 purposes.
That means ordinary payments for services generally aren’t subject to 1099-NEC reporting solely because the vendor is an LLC.
Legal and certain medical payments can still be reportable.
LLCs Taxed as C Corporations
The same basic concept applies to an LLC taxed as a C corporation.
For ordinary services, payments to the corporation generally aren’t subject to 1099-NEC reporting.
But the corporation exception doesn’t apply to every type of payment.
The W-9 Is Your Best Friend
If you’re hiring independent contractors, don’t wait until January to figure out how they’re taxed.
Ask for a Form W-9 when you onboard the vendor.
The W-9 provides information such as the vendor’s legal name, taxpayer identification number, and federal tax classification. That information helps you determine whether a 1099 may be required.
And here’s an important point:
Don’t rely solely on the vendor’s business name.
“Jane Smith Consulting LLC” doesn’t tell you whether the LLC is taxed as a sole proprietorship, partnership, S corporation, or C corporation.
The W-9 is designed to give you that information.
Keep the completed W-9 with your vendor records. You generally don’t send the W-9 to the IRS with the 1099; you use it to prepare the information return if one is required.
What Payments Generally Require a 1099-NEC?
For 2026, businesses generally use Form 1099-NEC to report qualifying payments of $2,000 or more for services performed in the course of a trade or business by someone who isn’t an employee. (irs.gov)
That can include payments to:
- Independent contractors
- Freelancers
- Consultants
- Professional service providers
- Non-corporate vendors providing services
The payment generally needs to be made in the course of your business.
Personal payments don’t become 1099-reportable simply because they exceed $2,000.
There are also situations where payments involving materials or parts can still be reportable when the materials are incidental to the service being provided.
What About Rent?
Rent is generally reported on Form 1099-MISC, rather than 1099-NEC.
For 2026 payments, the general threshold for reportable rents is $2,000 or more.
For example, suppose your business rents office space from a landlord who isn’t a corporation and you pay $30,000 during the year. That may create a 1099-MISC reporting requirement.
There are exceptions, including certain payments made to real estate agents or property managers, so the details matter.
Legal and Medical Payments Are Special
This is one of the biggest areas where the normal “corporations don’t get 1099s” rule breaks down.
Payments for legal services can be reportable even when the law firm is incorporated.
For 2026, attorneys’ fees of $2,000 or more paid in the course of a business are generally reported on Form 1099-NEC. Certain gross proceeds paid to attorneys in connection with legal matters are instead reported on Form 1099-MISC.
Likewise, payments of $2,000 or more for medical and health care services can generally require a Form 1099-MISC even when the provider is a corporation.
So if your company paid a corporate law firm $15,000, don’t assume, “They’re incorporated, so no 1099.”
That’s exactly the sort of exception that can get missed.
What About Payments for Products?
Buying something from a vendor isn’t generally the same as paying that vendor for services.
For example, if your business buys $10,000 worth of office furniture from a corporation, that purchase generally doesn’t create a 1099-NEC requirement.
Likewise, ordinary purchases of inventory or merchandise generally aren’t reported on Form 1099-NEC.
The distinction between services and goods is important.
If you pay a contractor $8,000 to remodel your office, however, you can’t necessarily avoid 1099 reporting by pointing out that the contractor also supplied $3,000 of materials. When materials are incidental to the service, the payment can still be reportable.
When Are 1099s Due?
For most 1099-NEC forms, the deadline is January 31 following the calendar year in which the payments were made.
For example, payments made during 2026 generally mean the 1099-NEC must be furnished to the recipient and filed with the IRS by January 31, 2027.
If January 31 falls on a weekend or legal holiday, the deadline generally moves to the next business day.
Other 1099 forms can have different filing deadlines depending on the form and whether you’re filing electronically or on paper.
Don’t leave this until the last week of January. If a vendor’s W-9 is missing or contains incorrect information, tracking them down at the last minute is considerably more painful.
Do You Have to E-File Your 1099s?
There’s another important recent change here.
Businesses generally must e-file information returns if they file 10 or more information returns during the calendar year.
And that 10-return threshold isn’t limited to 1099s. The IRS generally aggregates many types of information returns when determining whether you’ve reached the threshold.
For example, a business with nine 1099s isn’t necessarily subject to the mandatory e-filing rule based solely on those nine forms.
A business with five 1099s and five W-2s, however, may reach the 10-return threshold.
The IRS also provides IRIS, its free Information Returns Intake System, for electronic filing of 1099s and other information returns.
What Happens If You Don’t Issue a Required 1099?
Failing to file a required information return can result in penalties, and the amount can depend on factors such as how late the form is filed and whether the failure was intentional.
More importantly, a 1099 isn’t just a piece of paperwork you can ignore because you know the contractor will report the income anyway.
The information return gives the IRS a matching document. If the contractor reports $10,000 of income but you were supposed to issue a 1099 and didn’t, that doesn’t necessarily change the contractor’s tax liability—but it can create an information-reporting problem for your business.
That’s why it’s better to build the process into your bookkeeping rather than trying to reconstruct it at tax time.
A Simple 1099 Process for Your Business
You don’t need a complicated system.
When you hire a new contractor or vendor, collect a W-9.
As you pay them, categorize the payments correctly in your accounting system.
At the end of the year, review your vendor list for:
- Total payments made
- Vendor tax classification
- Type of payment
- Applicable reporting threshold
- W-9 status
Then determine which vendors need 1099s.
This is much easier than opening your bank account in January and trying to remember whether the $7,800 you paid “Mike’s Web Stuff LLC” was for consulting, software, advertising, or something else.
The Bottom Line
S corporations and LLCs absolutely can have 1099 responsibilities—but the answer isn’t simply “LLCs need 1099s” or “corporations don’t.”
Your business may need to issue 1099s even if it’s an S corporation.
And whether your business needs to issue a 1099 to an LLC depends largely on how that LLC is taxed and what you paid it for.
For 2026, the general federal threshold for many 1099-NEC service payments is now $2,000, not the old $600 threshold. Legal and medical payments, rents, royalties, and other categories can have their own reporting rules and exceptions.
The safest approach is simple: collect W-9s when you onboard vendors, keep good payment records, and review your 1099 requirements before year-end.
If your business works with a large number of contractors or vendors, a CPA can also help you build a repeatable process so 1099 season doesn’t become a January fire drill.
General Information Note: This article provides general information and should not be construed as definitive legal or tax advice. Tax laws and individual circumstances change frequently. Consult a qualified tax professional regarding your specific situation.