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.
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:
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.
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:
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:
|
Payment Method |
Who Reports It |
Form Used |
|
Cash, check, or ACH |
You |
1099-NEC |
|
Credit card or payment app |
The payment processor |
1099-K |
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:
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.
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:
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.
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:
The more organized you are throughout the year, the easier it is to avoid penalties, misfiled forms, or IRS notices later on.
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:
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:
Before filing season rolls around, ask yourself:
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.