Do LLCs get a 1099? Contractor reporting rules explained

The question comes up every January: do I need to send a 1099 to this LLC I paid last year?

The answer depends on four things, not just one: the LLC's federal tax classification, the type of payment, how the payment was made, and the applicable reporting threshold for the 2026 tax year. Getting one of these wrong can mean filing a form that was not required, or missing one that was.

Why the LLC's federal tax classification is the starting point

An LLC is a state-law structure. Federal tax treatment depends on the LLC's ownership and elections, and the 1099 rules follow the federal classification.

A domestic LLC with one member is generally a disregarded entity for federal income tax purposes. A domestic LLC with at least two members is generally classified as a partnership. An LLC that has filed Form 8832 to elect corporate tax treatment is treated as a C-Corporation. An LLC that has elected S-Corporation status is treated as an S-Corporation. Each classification produces a different 1099 outcome.

The classification that controls 1099 reporting is what the LLC checked on Form W-9, not how its name reads on an invoice or what a business card says.

One qualification that does not appear in most guides: a disregarded entity is not necessarily owned by an individual. If the direct owner is also a disregarded entity, the W-9 identifies the first owner in the chain that is not disregarded. A disregarded LLC owned by a corporation follows that corporation's classification, not an individual's. The W-9 resolves this, which is why collecting it before payment matters.

The 2026 reporting threshold is $2,000 for most payments

For ordinary nonemployee service payments made during 2026, the reporting threshold is $2,000 in calendar-year payments to the payee. This is a change from the $600 threshold that applied to payments made before 2026. The increase came from Section 70433 of the One Big Beautiful Bill Act, effective for payments made after December 31, 2025.

The $2,000 threshold applies to payments covered by IRC Sections 6041 and 6041A, which includes most ordinary contractor payments reportable on Form 1099-NEC and most miscellaneous payments on Form 1099-MISC. However, the threshold does not apply uniformly to every payment category. Qualifying gross proceeds paid to attorneys remain reportable at $600, and royalties remain reportable at $10.

Payment method also affects whether a 1099 is required. Credit-card and payment-card payments, and qualifying third-party-network transactions covered by Form 1099-K reporting, are excluded from the payer's Form 1099-NEC or 1099-MISC obligation. The payment settlement entity handles Form 1099-K for those transactions. Keeping card-paid amounts separate from check and ACH payments is necessary to avoid issuing a duplicate 1099 for amounts already reported through the payment network.

The exceptions that override the corporate exemption

An LLC taxed as a C-Corp or S-Corp is generally exempt from Form 1099-NEC and 1099-MISC reporting. That exemption is broad but not total. Certain payment categories require reporting regardless of the vendor's corporate status.

Attorney service fees: Legal fees paid for attorney services are always reportable, even when the law firm is organized as a corporation or as a professional LLC taxed as a C-Corp. These fees belong on Form 1099-NEC, box 1a. The 2026 threshold is $2,000.

Gross proceeds paid to attorneys: This is a separate category from attorney fees and uses a different form and threshold. When a payment to an attorney or law firm constitutes gross proceeds, such as a settlement amount deposited into the firm's trust account, the payment is reported on Form 1099-MISC, box 10, at the $600 threshold. The $2,000 contractor threshold does not apply here. The payer must determine whether the payment is for the attorney's services (Form 1099-NEC) or represents gross proceeds passing through to a third party (Form 1099-MISC, box 10).

Medical and healthcare payments: Payments to medical and healthcare service providers for healthcare services are reportable on Form 1099-MISC, box 6, at the $2,000 threshold. Certain exclusions apply: payments to pharmacies for prescription drugs, payments to tax-exempt hospitals or extended care facilities, and payments to specified government-owned facilities are excluded. Medical payments are not accurately described as always reportable. The payment recipient and payment purpose both determine whether the exception applies.

Other corporate exceptions exist for specific situations including fish purchased for resale, substitute payments in lieu of dividends or tax-exempt interest, and qualifying payments by federal executive agencies. These are narrow categories that most businesses will not encounter.

How to determine which rule applies, using the W-9

The W-9 is the document that tells a payer how to classify a vendor for information return purposes. For LLCs, the central distinction is whether the LLC is disregarded or has its own federal tax identity.

For a disregarded LLC: the vendor enters the owner's name on line 1, the LLC's name on line 2, and checks the owner's tax classification on line 3a. The TIN should be the owner's SSN or EIN, not the LLC's own EIN even if it has one.

For an LLC taxed as a partnership, C-Corporation, or S-Corporation: the vendor checks the LLC box on line 3a and enters P, C, or S in the classification field. The entity's own name and EIN are used.

The draft's earlier instruction to have a C-Corp LLC check the separate C-Corporation box on the W-9 was incorrect. LLCs always check the LLC box, then enter the applicable letter for their tax classification.

A disregarded LLC with a foreign owner uses the appropriate Form W-8, not Form W-9, even if the owner has a US taxpayer identification number. Collecting a W-9 in that situation would produce the wrong documentation.

A completed W-9 provides good-faith protection when a payer acts on the information provided, but it is not blanket immunity from penalties. Reliance on an exemption claim is not protected when the payer has actual knowledge that the classification or exempt-payee code is invalid or inconsistent.

Collect a W-9 from every new vendor before making the first payment. Payments accumulate during the year, and a vendor who receives $1,200 in April and $900 in September crosses the $2,000 threshold by September. Having the W-9 at onboarding eliminates the last-minute collection scramble each January.

The name and TIN fields on the 1099

When a 1099 is issued to an LLC, the name and TIN fields matter as much as whether the form is required at all.

For a disregarded single-member LLC: enter the owner's name as the primary name, the LLC's name on the second name line, and the owner's SSN or EIN as the TIN.

For a multi-member LLC taxed as a partnership: enter the LLC's name and use the LLC's EIN.

For an LLC taxed as a C-Corp or S-Corp where a 1099 is required (attorney fees, medical payments, or another exception): enter the LLC's name and use the LLC's EIN.

If a vendor did not provide a W-9, or provided one with a name or TIN that does not match IRS records, backup withholding at 24% may be required. If backup withholding applies, Form 1099-NEC or 1099-MISC reporting can be required regardless of payment amount.

Filing deadlines and penalties for the 2026 tax year

For payments made during 2026, information returns are due in early 2027:

• Form 1099-NEC: February 1, 2027 for both recipient copies and IRS filing (the January 31 standard deadline falls on a Saturday in 2027, so it shifts to the next business day).
• Form 1099-MISC: January 31, 2027 for recipient copies; February 28, 2027 for paper IRS filing; March 31, 2027 for electronic IRS filing.

The penalty tiers for returns due in 2027 reflect the current inflation-adjusted amounts. For returns filed late, the tiers are approximately $60 per form within 30 days of the due date, $130 per form between 31 days late and August 1, and $340 per form after August 1 or not filed at all. Intentional disregard of the filing requirement triggers a penalty starting at $690 per form with no cap. Confirm the current penalty amounts against IRS Publication 1099 (2026) before publishing, as these figures are inflation-adjusted annually.

Common mistakes to avoid

Using the $600 threshold for 2026 payments: The $600 threshold applied to payments made before 2026. For payments made during 2026, the ordinary contractor threshold is $2,000 for most payment categories under Sections 6041 and 6041A.

Treating attorney fees and gross proceeds as the same reporting category: Attorney service fees go on Form 1099-NEC at the $2,000 threshold. Gross proceeds paid to attorneys go on Form 1099-MISC, box 10, at the $600 threshold. Applying the $2,000 threshold to gross proceeds is incorrect.

Assuming all LLCs taxed as corporations are fully exempt: The corporate exemption does not apply to attorney fees or most medical and healthcare payments. Always identify the payment category before applying the exemption.

Having an LLC check the C-Corporation or S-Corporation box on its W-9: An LLC always checks the LLC box on line 3a and enters the applicable letter. It does not check the separate corporation boxes even if it is taxed as a corporation.

Issuing a 1099 for credit-card payments: Payments made by credit card or through qualifying payment networks are excluded from the payer's 1099-NEC and 1099-MISC obligation. Separate card-paid amounts from check and ACH amounts in the vendor records.

Using January 31, 2027 as the 1099-NEC deadline: January 31, 2027 falls on a Sunday. The deadline shifts to February 1, 2027.

How Inkle helps

Inkle's bookkeeping service tracks vendor payments throughout the year and flags 1099 obligations as they arise. For businesses filing W Series forms and 1099s, Inkle manages the full cycle: vendor W-9 collection, classification review, 1099 preparation, and IRS submission.

Learn more about Inkle's 1099 filing service.

Frequently asked questions

Do LLCs get a 1099?

It depends on the LLC's federal tax classification. A single-member LLC that is a disregarded entity generally receives a 1099-NEC for payments of $2,000 or more for services in 2026, the same as a sole proprietor. A multi-member LLC taxed as a partnership also receives 1099 forms for qualifying payments. An LLC taxed as a C-Corp or S-Corp is generally exempt from 1099-NEC and 1099-MISC, with exceptions for attorney fees (Form 1099-NEC) and most medical and healthcare payments (Form 1099-MISC).

What is the 1099 threshold for LLC payments in 2026?

For most ordinary contractor service payments made in 2026, the threshold is $2,000 in calendar-year payments to the vendor, up from $600 for payments made before 2026. Qualifying attorney gross proceeds remain reportable at $600 regardless of year. Royalties remain reportable at $10.

Does an LLC need a 1099 if it elected S-Corp status?

Generally no for ordinary service payments. An LLC with S-Corp treatment is exempt from most 1099-NEC and 1099-MISC reporting. The main exceptions are attorney fees (reportable on Form 1099-NEC at $2,000) and most medical and healthcare payments (reportable on Form 1099-MISC, box 6, at $2,000).

How do I know if an LLC I paid needs a 1099?

Collect a completed Form W-9 from the vendor. The W-9 shows the LLC's tax classification and identifies the correct name and TIN for information return purposes. Do not rely on invoice data or the LLC's name alone.

What name and TIN should I use on a 1099 issued to an LLC?

For a disregarded single-member LLC: use the owner's name as the primary name, the LLC name on the second line, and the owner's SSN or EIN. For a multi-member LLC taxed as a partnership or for a corporate-taxed LLC where a 1099 is required: use the LLC's name and EIN.