Filing 1099s as an ecommerce business comes down to four steps: collect a Form W-9 from every contractor before you pay them, work out which payments are actually reportable by you rather than by a payment processor, file Form 1099-NEC by January 31, and file electronically if you are issuing ten or more information returns of any kind combined. The step that trips up sellers is the second one, because most ecommerce businesses pay a large share of their contractors by card or through a platform, and those payments are not yours to report.
The thresholds also changed recently, so figures you remember from a prior year are probably wrong.
Step 1: know which threshold applies to which year
Two separate numbers moved, in opposite directions, and conflating them is the most common error.
Form 1099-NEC and 1099-MISC. The IRS instructions for the December 2026 revision state that you file a 1099-NEC for each person you paid at least $2,000 for services in the course of your business. IRS Publication 1099 for 2026 explains that for tax years beginning after 2025 the minimum threshold for reporting on certain information returns rose to $2,000 and will be adjusted for inflation beginning in 2027, where it was previously $600.
Note the timing carefully. The $600 figure governed tax year 2025, filed in early 2026. The $2,000 figure governs tax year 2026, which is what you will file in early 2027.
Two exceptions survive at the old amounts. Gross proceeds paid to an attorney, reported in box 10 of the 1099-MISC, stay at $600. Royalties stay at $10.
Form 1099-K. This is the one you receive rather than issue. The One Big Beautiful Bill Act, enacted in July 2025, reinstated the threshold that applied before the American Rescue Plan Act. The IRS now states that third party settlement organizations, meaning payment apps and online marketplaces, must report when payments for goods or services exceed $20,000 in more than 200 transactions. Both conditions have to be met.
There is a large exception that catches direct to consumer sellers. The IRS is explicit that there is no threshold at all for payment card transactions: receive one cent through a payment card and a 1099-K should be issued for it. A store running on a card processor gets a 1099-K regardless of volume. A marketplace seller has to clear both the dollar and transaction tests.
Step 2: work out which payments you report
This is the rule that saves ecommerce sellers the most trouble, and it is stated directly in the IRS instructions for Forms 1099-MISC and 1099-NEC: payments made with a credit card or payment card, and third party network transactions, must be reported on Form 1099-K by the payment settlement entity and are not subject to reporting on Form 1099-MISC or 1099-NEC.
So if you paid your product photographer by company credit card, or through a freelance platform that processes payment, you do not issue a 1099-NEC. The processor reports it. Issue one anyway and the contractor’s income is reported twice, which creates a problem for them and a correction for you.
Payments by check, ACH, or bank transfer are yours to report.
Corporations are generally excepted, including LLCs taxed as C or S corporations. The one exception that matters: the exemption does not apply to payments for legal services. Law firms get a 1099 even when incorporated.
Step 3: a worked example
A seller doing $2.4 million across Amazon and Shopify pays the following during tax year 2026.
| Payee | Amount | How paid | Issue a 1099? |
|---|---|---|---|
| Freelance copywriter, sole proprietor | $8,400 | ACH | Yes, 1099-NEC |
| Product photographer, sole proprietor | $6,200 | Company credit card | No, processor reports on 1099-K |
| Marketing agency, S corporation | $54,000 | ACH | No, corporation exception |
| Bookkeeper, single member LLC | $14,400 | Check | Yes, 1099-NEC |
| Law firm, professional corporation | $9,100 | ACH | Yes, corporation exception does not apply |
| Warehouse contractor, sole proprietor | $1,750 | ACH | No, under the $2,000 threshold for 2026 |
Three forms, not six. The seller who does not apply the card rule and the corporation exception issues six and creates three unnecessary problems.
Count the total, though, before assuming you can paper file. The ten return e-filing mandate aggregates across form types.
Step 4: deadlines and filing method
The statutory dates, from the IRS instructions:
- Form 1099-NEC: recipient copy and IRS filing both due January 31, whether you file on paper or electronically. There is no automatic extension available for the 1099-NEC.
- Form 1099-MISC: recipient copy January 31, IRS filing February 28 on paper or March 31 electronically.
- Form 1099-MISC with amounts in boxes 8 or 10: recipient copy due February 15.
If a due date falls on a Saturday, Sunday, or legal holiday, it moves to the next business day. Check the calendar for the year you are filing rather than assuming.
Electronic filing is mandatory at ten returns. The IRS states that if you have ten or more information returns you must file them electronically, and that the threshold is calculated by aggregating all information returns rather than applying separately to each type. Four Forms 1098 and six Forms 1099 means you e-file. W-2s filed with the Social Security Administration count toward the total. The IRS operates a free filing system called IRIS, and Form 8508 exists to request a hardship waiver.
Collect the W-9 first, not in January
The single most useful habit here is refusing to release a first payment until the W-9 is on file. Chasing a taxpayer identification number eleven months later, from a contractor who has moved on, is how filings get late.
The consequence of a missing or incorrect TIN is backup withholding. The IRS states the current rate is 24 percent, which you are required to withhold and remit. And a payment subject to backup withholding must be reported regardless of amount, so the $2,000 floor stops protecting you.
What late or wrong costs
For information returns due in calendar year 2026, the IRS publishes per return penalties of $60 if filed within 30 days, $130 if filed by August 1, $340 if filed after August 1 or not at all, and $680 for intentional disregard. Penalties apply separately for failing to file with the IRS and for failing to furnish the recipient copy, so one missed form can be charged twice. For this purpose the IRS defines a small business as one with average annual gross receipts of $5 million or less for the three most recent tax years.
A practical cadence
Do the work in November, not January. Pull a vendor payment report for the year, filter to non corporate payees paid by check or ACH, cross reference against W-9s on file, and chase the gaps while people still answer email.
Whatever tool holds your books should be able to produce that vendor report by payment method, which is the filter that does the real work. Ecommerce accounting platforms such as A2X, Synder, Webgility, and ConnectBooks sit between marketplaces and a general ledger for exactly this kind of year end reporting, though the 1099 determination itself stays a judgment call.
And that judgment is worth buying properly. The rules summarized here are general, the thresholds have moved twice in recent years, and entity classification and state level requirements vary. The IRS instructions for Forms 1099-MISC and 1099-NEC are the authoritative text, the IRS guidance on Form 1099-K covers what you receive, and a CPA or enrolled agent is the right person to confirm your specific facts before you file.