If a vendor is paid through a credit card, do you have to issue a 1099?

If you run a business, you’ve probably tangled with 1099 reporting at least once. And as more vendors accept everything from checks to PayPal to credit cards, things get even murkier. Are you supposed to send a 1099 for every vendor? What if you paid by Stripe or Venmo? And what if you used a mix of methods?

It’s no wonder tax season brings more confusion than clarity. Many business owners end up over-reporting, under-reporting, or scrambling to fix mistakes in January. 

One of the most common pain points is figuring out what to do when you pay a vendor by credit card or a third-party app. Does that still count toward the $600 reporting threshold? Do you need to issue a 1099-NEC? 

This article walks through what the IRS actually expects, when you’re on the hook for filing, and how to keep your reporting clean and accurate—without duplicating forms or wasting time. 

Do I need to send a 1099-NEC for each vendor I pay? 

The IRS uses Form 1099-NEC to track payments made to non-employees. That includes independent contractors, most partnerships, and sole proprietors. If you paid any of these vendors at least $600 for services during the year, you are probably required to report it. 

But not every payment or vendor falls under this rule. Here are the key exceptions to know: 

• Corporations generally do not receive a 1099-NEC, unless the payment is for legal or medical services. 
• Product purchases do not trigger 1099s. Payments for goods, materials, or supplies are excluded. 
• Small totals under $600 per vendor per year do not require a form, no matter how the vendor was paid. 
  

In most cases, the 1099-NEC only applies to service providers you paid more than $600 in total over the course of the year. That means you can ignore vendors you paid for products or vendors who fall under the corporate exception. 

Why does the way I pay a vendor matter so much for 1099s? 

Payment method plays a bigger role in 1099 reporting than most business owners expect. That’s because the IRS wants to avoid duplicate reporting. Depending on how you pay a vendor, the responsibility for reporting either falls on you or shifts to a third-party payment processor. 

Here’s how to tell the difference: 

• Cash, check, or direct deposit: If you pay $600 or more for services in a year, you are required to issue a Form 1099-NEC to that vendor. 
• Credit card or payment apps like PayPal, Venmo, Stripe, or Square: The payment processor handles the reporting by issuing a 1099-K. You do not need to send a 1099-NEC or 1099-MISC for these. 

This simple difference helps avoid duplicate forms for the same payment. It also means you need to track how each vendor was paid. 

Quick reference table: 

If I use both credit card and checks to pay a vendor, how should I handle reporting? 

This is a common situation, and it’s exactly where 1099 mistakes tend to happen. The IRS cares not just about how much you paid, but how you paid it. Different payment methods follow different reporting rules. 

If you pay a vendor by check, cash, or direct bank transfer, and those payments total $600 or more during the year, you are responsible for sending a 1099-NEC. These are considered reportable payments. 

If you pay that same vendor by credit card or through a platform like PayPal, Stripe, or Square, those payments are not your responsibility to report. The payment processor handles it and may issue a 1099-K if their thresholds are met. 

Example: 

• You pay your graphic designer $400 by credit card 
• You also pay them $700 by check in the same year 

Only the $700 check payment counts toward your 1099-NEC obligation. The $400 credit card payment is processed by a third party, and the IRS expects that third party to handle any required reporting. 

Even though the total payment is $1,100, you only report what you paid through check, cash, or direct deposit. Do not combine payment types when calculating 1099 totals. 

To stay accurate, track how each vendor was paid throughout the year. Good records now help avoid over-reporting or missing a required form later. 

Are there special rules for paying law firms, doctors, or corporations? 

Yes. Most payments to corporations are exempt from 1099-NEC reporting, but legal and medical service providers are an exception. 

If you pay a law firm or healthcare provider more than $600 for services in a year, the IRS may require you to file a 1099-NEC. But the requirement only applies if you paid them using non-card methods. 

Here’s how it breaks down: 

• Law firm paid by check, cash, or direct deposit: You must issue a 1099-NEC.
• Medical provider paid by check, cash, or direct deposit: You must issue a 1099-MISC.
• Law firm or medical provider paid by credit card, PayPal, or another third-party processor: You do not file a 1099-NEC. The processor will handle it with a 1099-K.

The key takeaway is that even incorporated vendors are not automatically exempt when it comes to legal and medical services. And just like with any vendor, how you pay them is what determines your reporting responsibility. 

If you regularly work with lawyers or medical professionals, build in a process to track their payments by method and flag any that require reporting. 

What should I do now to avoid a 1099 mess in January? 

Waiting until tax time to figure out your 1099 obligations is a recipe for errors and stress. The good news is that most of the heavy lifting can be done during the year, with just a few small habits. 

Start with these: 

• Get a W-9 from every vendor before sending payment 
  This form confirms their legal entity type and whether they’re subject to 1099 rules 
• Track payments by method, not just vendor 
  A single vendor may be paid partly by credit card and partly by check. Only the non-card portion needs to be considered for 1099-NEC 
• Flag service-based payments that hit the $600 threshold 
  You do not need to report payments for goods or products, only services 
• Review IRS rules annually 
  Reporting thresholds and 1099 instructions can change, especially with new legislation 
• When in doubt, ask a professional early 
  If you are unsure about how to classify a vendor or payment method, check with a tax advisor before year-end 

The more organized you are throughout the year, the easier it is to avoid penalties, misfiled forms, or IRS notices later on. 

Can I skip 1099s for credit card payments? And what if I make a mistake? 

Yes, you can skip 1099-NEC and 1099-MISC forms for payments made by credit card or third-party platforms like PayPal, Stripe, or Square. The payment processor handles that reporting through Form 1099-K. 

You’re only responsible for filing a 1099-NEC if: 

• The payment was made by cash, check, or bank transfer 
• The total for the year is $600 or more 
• The vendor is not a corporation, or is a law or medical firm receiving payment for services 

Mistakes happen when payment types get lumped together or vendors are misclassified. The fix? Solid records and clear tracking. Collect W-9s before issuing payments, flag vendors that meet the reporting threshold, and keep payment methods separated throughout the year. 

If you’re still unsure what applies, talk to a tax pro sooner rather than later. Catching an error in February is a lot easier than untangling it in June. 

Useful IRS references: 

• General Instructions for Certain Information Returns (IRS) 
• Form 1099-NEC Instructions (IRS)  
• Form W-9 (IRS) 
  

The bottom line

Before filing season rolls around, ask yourself: 

• Did I pay this vendor for a service (not goods)? 
• Was the payment $600 or more this year and made by cash, check, or direct deposit? 
• Did I collect a W-9 from the vendor before paying them? 
• Is the vendor a corporation, and if so, was it for legal or medical services? 
• Did I use a credit card or app like PayPal to pay? (If yes, no 1099-NEC needed from me!) 

Need help before things get messy? 

Schedule a free call with our team. We’ll walk you through the rules, review your vendor list, and make sure you’re not sending forms you don’t need.