1099-NEC vs 1099-MISC for Contractors: Which One Do You File?

TL;DR: File 1099-NEC for nonemployee compensation paid to subcontractors for services ($600+ in 2025, $2,000+ starting 2026 under OBBBA), and reserve 1099-MISC for rent, royalties, prizes, attorney settlements, and medical payments. Almost every payment a GC makes to a sub is 1099-NEC, due to the IRS by January 31 along with the recipient copy.

If you're a general contractor confused about whether to file 1099-NEC or 1099-MISC for your subs, you're in good company. The IRS moved nonemployee compensation from Box 7 of the 1099-MISC to a dedicated form (1099-NEC) starting in tax year 2020, and a lot of contractor offices are still using outdated templates and old mental models.

Here's the short version, then the longer version, then the details that matter for construction.

The Short Version

• 1099-NEC is for nonemployee compensation: money you paid to a subcontractor for services.
• 1099-MISC is for miscellaneous income: rents, royalties, prizes, settlements, crop insurance proceeds, etc.
• For almost every subcontractor payment you make as a GC, you file 1099-NEC.

If you only remember one thing from this post: pay a sub for work → file 1099-NEC. You will very rarely need 1099-MISC for sub payments.

The Longer Version

Before 2020: Everything Was 1099-MISC

Pre-2020, all payments to non-employees were reported on 1099-MISC. The services you paid for went in Box 7 ("Nonemployee Compensation"). This form also captured rents, royalties, prizes, and other miscellaneous payments in different boxes. One form, many purposes.

2020: The IRS Split It

The IRS created the 1099-NEC specifically for nonemployee compensation and moved it off of the 1099-MISC. Reasons: faster processing, better matching against W-2 wage data, and to solve a mismatch in filing deadlines between nonemployee compensation and other 1099-MISC reporting, as a GC, this change affects you directly: almost every 1099 you file going forward is 1099-NEC.

Which Form for Which Payment

File 1099-NEC for:

• Payments to independent subcontractors for services (the vast majority of sub payments)
• Payments to individuals, sole proprietors, partnerships, and single-member LLCs taxed as disregarded entities (check the W-9 to determine status)
• Payments for services of $600 or more in a calendar year
• Attorney fees paid in the course of your trade or business

File 1099-MISC for:

• Rent paid to a landlord ($600+)
• Royalty payments ($10+)
• Prizes and awards
• Gross proceeds paid to an attorney (different from attorney fees. This is for settlements and similar)
• Medical and health care payments
• Crop insurance proceeds
• Fishing boat proceeds

In a typical GC operation, 1099-MISC shows up only for office rent (if you pay rent to a landlord who isn't a corporation) and possibly for legal settlements. Everything else is 1099-NEC.

Who Gets a 1099 From You?

For 1099-NEC reporting, you file for any payee who:

1. Is a US person (has a TIN. SSN, EIN, or ITIN)
2. Received $600 or more from you during the calendar year
3. Is not taxed as a corporation (C-corp or S-corp). With limited exceptions

You determine corporate status from the W-9 you collected from the sub at onboarding. On the W-9, the sub indicates their federal tax classification: individual/sole proprietor, partnership, C-corp, S-corp, LLC (and which tax classification the LLC uses), trust/estate, or other.

• Individual / Sole proprietor: 1099-NEC required at $600+
• Partnership: 1099-NEC required at $600+
• LLC. Disregarded / single-member: 1099-NEC required
• LLC. Partnership: 1099-NEC required
• LLC. C or S Corp: Generally NOT required (corporations are exempt)
• C or S Corporation: Generally NOT required

The corporation exemption has exceptions. Even corporations must receive a 1099 for certain types of payments, including attorney fees, medical/health care payments, and cash payments for fish (not relevant for most GCs). For standard subcontractor services, C-corps and S-corps are exempt from 1099 reporting.

Why Collecting W-9s Up Front Matters

Every rule above depends on having a W-9 on file. Without a W-9, you don't know the sub's TIN, their legal name, or their tax classification, so you can't file the 1099 correctly.

Worse, if you make payments to a sub without a W-9, the IRS technically requires you to withhold 24% of the payment as backup withholding and remit that to the IRS. We have a separate post on the 24% backup withholding rule covering exactly how this works and the penalties for getting it wrong.

The easy fix: collect the W-9 at onboarding, before the first check is cut. By the time January rolls around, you already have everything you need to file 1099-NECs.

This is exactly what PaperBoss does. It collects W-9s from every sub during onboarding as a required step, stores them encrypted, and exports a clean CSV in January for your 1099 filing software.

Filing Deadlines

1099-NEC deadlines are tight:

• January 31: Send Copy B (recipient copy) to the subcontractor
• January 31: File Copy A with the IRS (paper or electronic, same deadline)
• January 31: File with most states that require state-level filing

Note: this is significantly earlier than the deadline for 1099-MISC, which is February 28 (paper) or March 31 (electronic) for most boxes. This is one of the reasons the IRS split the forms. The nonemployee compensation deadline needed to be earlier to match up with wage reporting.

Penalties for late filing are steep. As of recent years, penalties range from $60 per form (if filed within 30 days late) to $330 per form (if filed more than 6 months late), with annual caps but no practical maximum for intentional disregard. On a 50-sub 1099 season, that's potentially $15,000+ in penalties for being late once.

How to File 1099-NEC

You have three practical options:

1. Online Filing Services

Tools like Track1099, Tax1099, Yearli, and efile4biz let you import a CSV of payees and payments, generate 1099-NEC forms, e-file with the IRS, and mail recipient copies. Cost: $3 to $5 per form. This is the best option for most GCs.

2. Your Accountant

If you work with a CPA for taxes, they can file 1099s on your behalf. You provide them a CSV or spreadsheet with each sub's W-9 data and total payments for the year. Cost varies.

3. Paper Filing (Avoid If Possible)

You can order paper 1099-NEC forms directly from the IRS and mail them. The IRS is phasing out paper filing for businesses with 10+ forms, and the process is slow, error-prone, and no cheaper than an online service. Don't do this unless you have 1 to 2 forms total.

Common Mistakes GCs Make

1. Using 1099-MISC for subcontractor payments. This was correct pre-2020 and is now wrong. Update your filing templates.
2. Missing the W-9 and filing anyway. Without a W-9, you're guessing at the TIN and tax classification. Wrong information triggers IRS notices and penalties.
3. Forgetting to 1099 an LLC because "they're an LLC." LLCs are only exempt if taxed as a corporation. Single-member LLCs, partnerships, and LLCs taxed as disregarded entities all get 1099s.
4. Missing the January 31 deadline. This is the most common expensive mistake. Build the deadline into your compliance calendar.
5. Not issuing recipient copies. You must send Copy B to the sub by January 31, regardless of how you file with the IRS. Email with consent is acceptable; otherwise mail.

How PaperBoss Makes 1099 Season Easy

The fire drill every January exists because GCs scramble to collect W-9s from subs who've long since moved on to other jobs. PaperBoss eliminates the fire drill by collecting W-9s at onboarding, not at year-end.

When January arrives, PaperBoss exports a clean CSV of every sub's W-9 data. Legal name, TIN, address, entity type. Which you can import directly into Track1099 or any other filing service. The entire process takes an hour instead of a week.

Start your 14-day free trial, no credit card required.

Frequently Asked Questions

Do I need to file 1099-NEC if I paid a sub less than $600?

No. The $600 threshold is per payee, per calendar year, across all payments for services. Under $600, no 1099 required. (Note: different thresholds apply for other forms. $10 for royalty payments on 1099-MISC, for example.)

What if I paid a sub by credit card or PayPal?

Payments made through third-party settlement organizations (credit card processors, PayPal business, etc.) are reported by the processor on Form 1099-K, not by you. If you paid a sub by credit card, you don't file a 1099-NEC for that portion. Only cash, check, and ACH payments count.

Do I need to 1099 a handyman I paid $800 to fix an office door?

If the work was for your trade or business, yes. 1099-NEC required. If it was for a personal-use building, no. For a GC's commercial office, it's business-related and reportable.

What if the sub's W-9 shows "LLC" but doesn't say which classification?

That W-9 is incomplete. Go back to the sub and ask them to reissue with the LLC tax classification (C, S, or P) or as a disregarded entity. Filing a 1099 based on an incomplete W-9 risks errors and penalties.

Do I file 1099-NEC for a foreign subcontractor?

No. Foreign persons receive Form 1042-S, not 1099-NEC. You also need a W-8BEN instead of a W-9 to establish foreign status. See our post on W-9 vs W-8 for details.

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This article is for educational purposes only and does not constitute tax or legal advice. Consult a qualified CPA or tax attorney for your specific filing situation.