Getting the form right comes down to what you paid for. Use this step-by-step decision tree, then check the quick-reference chart and special rules.
Step-by-step decision tree (TY2025+)
1) Was the payment made by card or a third-party network (PayPal/Venmo “goods & services,” Cash App business, etc.)?
→ No 1099-NEC/MISC. Those transactions are reportable by the processor on Form 1099-K, not by you. IRS
2) Was the payment personal (not in your trade or business)?
→ No 1099. Business reporting rules don’t apply to purely personal payments. IRS
3) Is it compensation for services by a non-employee (contractor, freelancer, director’s fees, etc.) totaling $600+?
→ Form 1099-NEC, Box 1. (Corporations are generally exempt except for attorney fees.) Due to IRS on Jan 31. IRS
4) Is it one of the specific 1099-MISC categories?
- Rents → MISC Box 1
- Royalties ($10+ threshold) → MISC Box 2
- Other income ($600+) (prizes/awards not for services, punitive damages, etc.) → MISC Box 3
- Fishing boat proceeds → MISC Box 5
- Medical & health care payments ($600+) (report even if payee is a corporation) → MISC Box 6
- Crop insurance proceeds → MISC Box 9
- Gross proceeds paid to an attorney ($600+) (settlements, escrow checks to a lawyer) → MISC Box 10
- Fish purchased for resale (cash) → MISC Box 11
- Direct sales of $5,000+ of consumer products for resale (checkbox) → MISC Box 7 or NEC Box 2 (choose one, not both)
If any apply, file Form 1099-MISC (IRS due: Feb 28 paper / Mar 31 e-file). IRS
5) Attorney payments—fee vs. proceeds (common pitfall).
- Attorney’s fees for services ($600+) → 1099-NEC Box 1, even if the law firm is a corporation.
- Gross proceeds paid to an attorney ($600+) (e.g., settlement funds paid to a lawyer) → 1099-MISC Box 10 (do not put proceeds on NEC). IRS
6) Medical & health care payments (another pitfall).
Payments to doctors, clinics, labs, dentists, ambulance companies, etc., $600+ → 1099-MISC Box 6, even if incorporated. Pharmacy purchases are excluded. IRS
7) Backup withholding taken?
If you withheld federal income tax, report it in MISC Box 4 (or NEC Box 4) and file a form regardless of the dollar amount. IRS
Quick-reference chart (most common cases)
| Payment type | Form & box | Notes |
|---|---|---|
| Contractor services ($600+) | 1099-NEC Box 1 | Corporations usually exempt except attorney fees. IRS |
| Rents | 1099-MISC Box 1 | Rent paid to agent/manager is not on NEC; the agent issues MISC to owner. IRS |
| Royalties ($10+) | 1099-MISC Box 2 | $10 threshold applies. IRS |
| Prizes/awards not for services ($600+) | 1099-MISC Box 3 | Game show, sweepstakes (no wager), etc. IRS |
| Medical & health care ($600+) | 1099-MISC Box 6 | Report even if payee is a corporation; excludes card/TPSO payments. IRS |
| Gross proceeds to attorney ($600+) | 1099-MISC Box 10 | For settlements/escrows; don’t use NEC for proceeds. IRS |
| Attorney fees ($600+) | 1099-NEC Box 1 | Fees for legal services, even if law firm is a corporation. IRS |
| Direct sales for resale ($5,000+) | Checkbox: MISC Box 7 or NEC Box 2 | Use either form’s checkbox (not both). IRS |
| Fishing boat proceeds | 1099-MISC Box 5 | IRS |
| Fish purchased for resale (cash) | 1099-MISC Box 11 | IRS |
| Crop insurance proceeds | 1099-MISC Box 9 | IRS |
| Card/TPSO (PayPal/Venmo G&S, etc.) | 1099-K by processor | Do not issue NEC/MISC for these payments. IRS |
Special rules & exclusions you’ll use a lot
- Corporations: Generally no 1099 for payments to corporations, except (1) attorney fees (NEC Box 1), (2) gross proceeds to attorneys (MISC Box 10), (3) medical & health care payments (MISC Box 6), and certain other listed boxes (for example, substitute payments). IRS
- Agents/property managers: If you pay rent to a property manager, you do not issue NEC; the manager issues MISC to the owner. IRS
- “Other income” vs. services: If a payment isn’t for services and doesn’t fit another MISC box, use MISC Box 3 (e.g., taxable prize not tied to work). Services belong on NEC Box 1. IRS
- Medical research payments: Often reported in MISC Box 3 (other income)—not Box 6—when not for services. Check facts. IRS
- Direct sales checkbox: You may check either NEC Box 2 or MISC Box 7 to signal $5,000+ of consumer products for resale—but don’t duplicate. IRS
- Backup withholding: If you withheld under backup rules, you must file and show the tax withheld (Box 4 on the applicable form), even if the dollar amount is under the usual threshold. IRS
1099 Software and Outsourcing
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