Every November, I start hearing the same sentences from business owners about 1099s. Most of them sound reasonable. Some of them were true a few years ago. A few were never true at all. The trouble is that January 31 arrives quickly, and a myth you believe in November turns into a scramble in the last week of January.
So this year I want to clear the air early. Here are five 1099 myths I hear all the time, and what the IRS actually says. None of this replaces a review of your own situation, but it should help you walk into year-end with clearer expectations.
Myth 1: “Anyone I paid $600 gets a 1099”
For years, $600 was the number everyone memorized. It has changed. The IRS now states that Form 1099-NEC reporting applies to payments for services to a non-employee totaling $2,000 or more for payments made after December 31, 2025 (IRS, Form 1099-NEC & Independent Contractors). The IRS instructions also note that this threshold may be adjusted for inflation beginning in calendar year 2027 (IRS, Instructions for Forms 1099-MISC and 1099-NEC).
What I tell owners: do not rely on memory. Pull a vendor payment report for the full calendar year and look at the totals for each service provider. That report, not a gut feeling, decides who is on your list.
Myth 2: “I’ll collect W-9s in January”
This is the one that causes the most stress. The IRS says you must file Form 1099-NEC on or before January 31, and that payee statements must also be furnished by January 31 (IRS, Instructions for Forms 1099-MISC and 1099-NEC). Waiting until January to ask for paperwork leaves almost no room for slow replies.
Form W-9 can be used to request the correct name and taxpayer identification number of the payee (IRS, Forms and associated taxes for independent contractors). If a payee has not provided a TIN in the manner required, backup withholding at 24% can apply to reportable payments (IRS, Forms and associated taxes for independent contractors).
What I tell owners: ask for a W-9 before the first payment, every time. For this year, send requests now to anyone you are missing.
Myth 3: “Card payments go on the 1099-NEC too”
If you paid a contractor with a credit card or a payment card, the IRS instructions say those payments are reported on Form 1099-K and are not subject to reporting on Form 1099-MISC or Form 1099-NEC (IRS, Instructions for Forms 1099-MISC and 1099-NEC).
This is exactly why clean bookkeeping matters. If your books record every contractor payment the same way, you cannot tell which ones came from the bank account and which came from a card. When we set up vendor records, we make sure payment method is visible, so the 1099 list is built from the right transactions.
Myth 4: “Corporations never get a 1099”
This one is mostly true, which is why it is dangerous. The IRS instructions say payments to a corporation, including an LLC treated as a C or S corporation, are generally exempt. But the same instructions say the exemption does not apply to payments for legal services (IRS, Instructions for Forms 1099-MISC and 1099-NEC).
The IRS also lists payments for merchandise, freight, storage and similar items among payments that do not require a 1099-NEC, and it notes that only payments made in the course of your trade or business are reported; personal payments are not reportable (IRS, Instructions for Forms 1099-MISC and 1099-NEC).
What I tell owners: the W-9 tells you how a vendor is classified. Do not guess from the name on the invoice.
Myth 5: “A contract makes them a contractor”
A written agreement helps, but it does not settle the question on its own. The IRS says you should consider the extent of the right to direct and control the worker, look at the entire relationship, and weigh evidence in three categories: behavioral control, financial control and the type of relationship. It also notes that no one factor stands alone in making the determination (IRS, Independent contractor or employee?).
If the answer is unclear, the IRS says either the business or the worker may file Form SS-8 to request a determination, which may take at least six months (IRS, Independent contractor or employee?).
What I tell owners: if someone works set hours, uses your equipment and follows your process every day, have that conversation now, not after the forms go out.
The quiet fix: a November 1099 review
Most 1099 problems are not tax problems. They are record-keeping problems that show up at a deadline. A short review in November usually covers it: confirm the vendor list, check payment totals against the current threshold, separate card payments, collect missing W-9s and flag any worker relationships that deserve a second look.
How PRC can help
At PRC Accounting & Taxation, we are an accounting and tax firm that keeps books clean all year so year-end filings are calm, not rushed. We can review your vendor records, organize your W-9s and prepare your information returns as part of your bookkeeping. Book a free 30-minute consultation, call us at (984) 379-7823, or email office@prcaccounting.com.
Hafiz M. Riaz, FCCA (UK), Founder & CEO, PRC Accounting & Taxation LLC. IRS PTIN holder.
Sources
- IRS, Form 1099-NEC & Independent Contractors (FAQs)
- IRS, Instructions for Forms 1099-MISC and 1099-NEC
- IRS, Forms and associated taxes for independent contractors
- IRS, Independent contractor (self-employed) or employee?
This article is general information, not tax or legal advice for your specific situation. Confirm dates and rules against the current IRS source before you rely on them.