Form 1099-NEC for payments above $600
Member since 2024 · 36 posts · 7 votes
Form 1099-NEC for payments above $600
Most Popular Reply
Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votesQuote from @Jonathan Blanco:
Quote from @Michael Plaks:
Quote from @Jonathan Blanco:
I have a single-member LLC to do fix-and-flips. I pay other small businesses (LLCs) for work they do on my property (remodels, AC work, a new fence, new roof, etc). My payments to them are made out to their LLCs. I read 1099-NEC is required if they file their taxes as single-member or partnership. My questions are:
- Do I have to issue forms 1099-NEC to them for payments above $600?
- If so, do I give them a W-9 to fill out before work starts? Before payment is made?
- What if they refuse (for some reason) to fill out the W-9? If they refuse after I paid them for the work?
- Is form 1099-NEC filed through a software? Are there free options to file it?
Any other information I am not thinking of is greatly appreciated!
Most of your questions are addressed here:
https://www.biggerpockets.com/forums/51/topics/1167632-expla...
Can I issue the 1099 without having a w-9 on record? For example, their EIN is public record as well as their address, in my case, on the Florida website where business entities can be looked up.
You should always collect one prior to issuing any payment. This will prevent you from scrambling and asking for it. Once people get paid, especially non-employees/independent contractors they will disappear....
LuxePrivate Investments LLC 572 Reviews
11 Replies
- 8moJason MalabuteBusiness MemberAccountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 901 votes
In general, you only issue a 1099-NEC if all of the following are true:- You paid $600 or more during the year,
- The payment was for services (labor), not materials, and
- The vendor is not taxed as a C-Corp or S-Corp.
If the contractor or LLC is taxed as an S-Corporation or C-Corporation, you do not issue a 1099-NEC
Malabute & Company CPAs525 Reviews- Member since 2024 · 36 posts · 7 votes8moFor #2, what if the payment was for labor AND materials? For contractors that provide labor and materials.
Quote from @Jason Malabute:
In general, you only issue a 1099-NEC if all of the following are true:- You paid $600 or more during the year,
- The payment was for services (labor), not materials, and
- The vendor is not taxed as a C-Corp or S-Corp.
If the contractor or LLC is taxed as an S-Corporation or C-Corporation, you do not issue a 1099-NEC
For #3, how would I know if the vendor is taxed as c or s-corp?
- 8moMichael PlaksPro MemberTax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
Quote from @Jonathan Blanco:
I have a single-member LLC to do fix-and-flips. I pay other small businesses (LLCs) for work they do on my property (remodels, AC work, a new fence, new roof, etc). My payments to them are made out to their LLCs. I read 1099-NEC is required if they file their taxes as single-member or partnership. My questions are:
- Do I have to issue forms 1099-NEC to them for payments above $600?
- If so, do I give them a W-9 to fill out before work starts? Before payment is made?
- What if they refuse (for some reason) to fill out the W-9? If they refuse after I paid them for the work?
- Is form 1099-NEC filed through a software? Are there free options to file it?
Any other information I am not thinking of is greatly appreciated!
Most of your questions are addressed here:
https://www.biggerpockets.com/forums/51/topics/1167632-expla...
- Member since 2024 · 36 posts · 7 votes8moThank you.
Quote from @Michael Plaks:
Quote from @Jonathan Blanco:
I have a single-member LLC to do fix-and-flips. I pay other small businesses (LLCs) for work they do on my property (remodels, AC work, a new fence, new roof, etc). My payments to them are made out to their LLCs. I read 1099-NEC is required if they file their taxes as single-member or partnership. My questions are:
- Do I have to issue forms 1099-NEC to them for payments above $600?
- If so, do I give them a W-9 to fill out before work starts? Before payment is made?
- What if they refuse (for some reason) to fill out the W-9? If they refuse after I paid them for the work?
- Is form 1099-NEC filed through a software? Are there free options to file it?
Any other information I am not thinking of is greatly appreciated!
Most of your questions are addressed here:
https://www.biggerpockets.com/forums/51/topics/1167632-expla...
Can I issue the 1099 without having a w-9 on record? For example, their EIN is public record as well as their address, in my case, on the Florida website where business entities can be looked up. - 8moErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
Quote from @Jonathan Blanco:
Thank you.Quote from @Michael Plaks:
Quote from @Jonathan Blanco:
I have a single-member LLC to do fix-and-flips. I pay other small businesses (LLCs) for work they do on my property (remodels, AC work, a new fence, new roof, etc). My payments to them are made out to their LLCs. I read 1099-NEC is required if they file their taxes as single-member or partnership. My questions are:
- Do I have to issue forms 1099-NEC to them for payments above $600?
- If so, do I give them a W-9 to fill out before work starts? Before payment is made?
- What if they refuse (for some reason) to fill out the W-9? If they refuse after I paid them for the work?
- Is form 1099-NEC filed through a software? Are there free options to file it?
Any other information I am not thinking of is greatly appreciated!
Most of your questions are addressed here:
https://www.biggerpockets.com/forums/51/topics/1167632-expla...
Can I issue the 1099 without having a w-9 on record? For example, their EIN is public record as well as their address, in my case, on the Florida website where business entities can be looked up.You should always collect one prior to issuing any payment. This will prevent you from scrambling and asking for it. Once people get paid, especially non-employees/independent contractors they will disappear....
LuxePrivate Investments LLC 572 Reviews - 8moMichael PlaksPro MemberTax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votesAs long as you are confident that this is their true EIN and address - yes. I would verify their EIN with them, and you also need to verify that this is not a corporation. W-9 includes the type of entity for this purpose.
Quote from @Jonathan Blanco:
Thank you.Quote from @Michael Plaks:
Quote from @Jonathan Blanco:
I have a single-member LLC to do fix-and-flips. I pay other small businesses (LLCs) for work they do on my property (remodels, AC work, a new fence, new roof, etc). My payments to them are made out to their LLCs. I read 1099-NEC is required if they file their taxes as single-member or partnership. My questions are:
- Do I have to issue forms 1099-NEC to them for payments above $600?
- If so, do I give them a W-9 to fill out before work starts? Before payment is made?
- What if they refuse (for some reason) to fill out the W-9? If they refuse after I paid them for the work?
- Is form 1099-NEC filed through a software? Are there free options to file it?
Any other information I am not thinking of is greatly appreciated!
Most of your questions are addressed here:
https://www.biggerpockets.com/forums/51/topics/1167632-expla...
Can I issue the 1099 without having a w-9 on record? For example, their EIN is public record as well as their address, in my case, on the Florida website where business entities can be looked up. - Member since 2024 · 36 posts · 7 votes8moThank you
Quote from @Erik Estrada:
Quote from @Jonathan Blanco:
Thank you.Quote from @Michael Plaks:
Quote from @Jonathan Blanco:
I have a single-member LLC to do fix-and-flips. I pay other small businesses (LLCs) for work they do on my property (remodels, AC work, a new fence, new roof, etc). My payments to them are made out to their LLCs. I read 1099-NEC is required if they file their taxes as single-member or partnership. My questions are:
- Do I have to issue forms 1099-NEC to them for payments above $600?
- If so, do I give them a W-9 to fill out before work starts? Before payment is made?
- What if they refuse (for some reason) to fill out the W-9? If they refuse after I paid them for the work?
- Is form 1099-NEC filed through a software? Are there free options to file it?
Any other information I am not thinking of is greatly appreciated!
Most of your questions are addressed here:
https://www.biggerpockets.com/forums/51/topics/1167632-expla...
Can I issue the 1099 without having a w-9 on record? For example, their EIN is public record as well as their address, in my case, on the Florida website where business entities can be looked up.You should always collect one prior to issuing any payment. This will prevent you from scrambling and asking for it. Once people get paid, especially non-employees/independent contractors they will disappear....
- Accountant · Austin, TX · Member since 2016 · 72 posts · 72 votes8mo
There is also another big exception that I don't think was mentioned in this thread (but it was in Michael's linked thread), you don't have to report payments that were made by credit card or certain other payment methods. That's because these types of payment methods fall under other reporting requirements handled by the payment processor, so the government doesn't require that you also report these payments because then they would end up with overlapping reported income. Here's my summary of types of payment that do and don't require reporting on a 1099-NEC:
- Cash: You must report it.
- Check / money order / cashier’s check / ACH: You must report it.
- Credit card / debit card: You don’t need to report it.
- Venmo: You need to report payments to personal accounts if you don’t select the “turn on for purchases” option. You don’t need to report payments to Venmo business accounts.
- PayPal: You need to report payments made to personal accounts if you used the “friends and family” option, but not if you used the “goods and services” option. Payments to business accounts don’t have to be reported.
- Cash App: You must report it unless the payment was sent to a Business account.
- Zelle: You must report it.
TaxBandits is the 1099 filing service that I generally use. I tried several others, but I prefer that one.
David Orr
Tax Modern- Member since 2024 · 36 posts · 7 votes8mo
Quote from @David Orr:
There is also another big exception that I don't think was mentioned in this thread (but it was in Michael's linked thread), you don't have to report payments that were made by credit card or certain other payment methods. That's because these types of payment methods fall under other reporting requirements handled by the payment processor, so the government doesn't require that you also report these payments because then they would end up with overlapping reported income. Here's my summary of types of payment that do and don't require reporting on a 1099-NEC:
- Cash: You must report it.
- Check / money order / cashier’s check / ACH: You must report it.
- Credit card / debit card: You don’t need to report it.
- Venmo: You need to report payments to personal accounts if you don’t select the “turn on for purchases” option. You don’t need to report payments to Venmo business accounts.
- PayPal: You need to report payments made to personal accounts if you used the “friends and family” option, but not if you used the “goods and services” option. Payments to business accounts don’t have to be reported.
- Cash App: You must report it unless the payment was sent to a Business account.
- Zelle: You must report it.
TaxBandits is the 1099 filing service that I generally use. I tried several others, but I prefer that one.
David Orr
Tax ModernThank you
- 8moAshish AcharyaBusiness MemberCPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
Hey Jonathan, you’re questions a lot of investors have right now and you’ve gotten some solid answers.
As others mentioned, a 1099-NEC is generally required for payments of $600 or more to independent contractors. If you're paying an LLC that's taxed as a C-corp or S-corp, you usually don't need to issue a 1099, but you'll want to confirm that with them up front. It's always safer to collect a W-9 before the work starts and before you pay anything. Once the job is done, it can be hard to track people down. You can look up EINs online, but it’s better to just have them complete the W-9 themselves. That way the information is coming directly from them and it's their responsibility. The W-9 gives you the info you need (tax ID, entity type, etc.) and protects you on your end. If someone refuses to provide one, you’re technically required to withhold backup withholding (24%) and document that you requested it.
For filing, 1099-NECs can be handled through most accounting software, payroll providers, or your bookkeeper if you have one. Tools like what David mentioned, TaxBandits, or even QuickBooks can help you with the 1099s. And to answer your question about the labor and materials, what matters for a 1099-NEC is the total amount you paid the contractor, not how they broke it out on their invoice. If you paid one contractor a single amount that included both labor and materials, the full amount generally goes on the 1099-NEC.
The idea that “1099s are only for labor” gets misunderstood a lot. That rule mainly applies when materials are purchased separately (like you buying supplies directly from Home Depot). But if the contractor bought the materials, marked them up, and billed you for everything, that’s still compensation paid to the contractor, so it’s included.
Since it looks like you're pretty experienced with the flips, you probably already know it’s more than just tracking income and expenses. I still wanted to share this because it makes a real difference for some of the clients we work with, how you set up your entity, pay yourself, track costs by project, time income, and handle contractor reporting can all impact what you actually keep after taxes.
Good luck and happy to connect!
INVESTOR FRIENDLY CPA®5241 Reviews- Member since 2024 · 36 posts · 7 votes8mo
Quote from @Ashish Acharya:
Hey Jonathan, you’re questions a lot of investors have right now and you’ve gotten some solid answers.
As others mentioned, a 1099-NEC is generally required for payments of $600 or more to independent contractors. If you're paying an LLC that's taxed as a C-corp or S-corp, you usually don't need to issue a 1099, but you'll want to confirm that with them up front. It's always safer to collect a W-9 before the work starts and before you pay anything. Once the job is done, it can be hard to track people down. You can look up EINs online, but it’s better to just have them complete the W-9 themselves. That way the information is coming directly from them and it's their responsibility. The W-9 gives you the info you need (tax ID, entity type, etc.) and protects you on your end. If someone refuses to provide one, you’re technically required to withhold backup withholding (24%) and document that you requested it.
For filing, 1099-NECs can be handled through most accounting software, payroll providers, or your bookkeeper if you have one. Tools like what David mentioned, TaxBandits, or even QuickBooks can help you with the 1099s. And to answer your question about the labor and materials, what matters for a 1099-NEC is the total amount you paid the contractor, not how they broke it out on their invoice. If you paid one contractor a single amount that included both labor and materials, the full amount generally goes on the 1099-NEC.
The idea that “1099s are only for labor” gets misunderstood a lot. That rule mainly applies when materials are purchased separately (like you buying supplies directly from Home Depot). But if the contractor bought the materials, marked them up, and billed you for everything, that’s still compensation paid to the contractor, so it’s included.
Since it looks like you're pretty experienced with the flips, you probably already know it’s more than just tracking income and expenses. I still wanted to share this because it makes a real difference for some of the clients we work with, how you set up your entity, pay yourself, track costs by project, time income, and handle contractor reporting can all impact what you actually keep after taxes.
Good luck and happy to connect!
Thank you, very good information and happy to connect too.
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