How Form 1099-NEC works
When a US business pays a referral fee or commission, the IRS treats it as a payment for services by a nonemployee. If the payee is a US individual, a partnership or an LLC not taxed as a corporation, and the year's payments to them reach the reporting threshold, the business files Form 1099-NEC with the IRS and sends the payee a copy.
The threshold is per payee, per calendar year:
- Payments made in 2025 or earlier: $600 or more
- Payments made after December 31, 2025: $2,000 or more, which the IRS may adjust for inflation from 2027
The date that counts is when you paid, not when the fee was earned. Both copies are due January 31, or the next business day if that falls on a weekend or legal holiday. If you file 10 or more information returns in total, you must file electronically.
This is general information about US federal rules, not tax advice. Ask your accountant how they apply to your program. The 1099 for referral fees guide covers the details.
Why it matters for partner programs
Every referral partner or affiliate partner you pay in the US may need a 1099-NEC. The work is easy if you collect a Form W-9 from each US partner during onboarding, before the first payout. If a US partner does not give you a taxpayer identification number, you may have to begin backup withholding, currently 24% of reportable payments.
Partners outside the US give you Form W-8BEN or W-8BEN-E instead, and a foreign payee with a valid W-8 is generally exempt from 1099 reporting.
Example
Lumen Health pays referral fees by ACH. In 2026 it pays Brightline Agency, a multi-member LLC taxed as a partnership, $2,100. It pays Cobalt Consulting, an S corporation, $15,000. It pays a freelance consultant $1,800.
Brightline Agency is over the $2,000 threshold and not a corporation, so it gets a 1099-NEC for $2,100. Cobalt Consulting is a corporation, so it generally does not. The freelance consultant is under $2,000 for 2026 payments, so no form is needed. January 31, 2027 is a Sunday, so Lumen Health files and sends Brightline's form by Monday, February 1, 2027.