1099 for lawyers: Key rules and best practices

Accurate bookkeeping and reporting are critical for law firms, not just for internal clarity but also for staying compliant with IRS rules. One key step is handling the IRS 1099 form series correctly. While it may seem like extra paperwork, properly managing 1099s ensures your records are accurate and helps you avoid tax issues.

Modern payment tools make this process easier. According to the 8am™ 2025 Legal Industry Report, 59% of firms found that integrating online payment processing with billing software led to faster collections. Explore how 1099 works for lawyers, the rules that matter most, and the best practices that simplify compliance and collections.

How does a 1099 for lawyers work?

A 1099 form is the IRS’s way of making sure income is reported on both sides of a transaction. If your firm pays a vendor or contractor more than $600 in a year, you’re usually required to file a 1099. One copy goes to the vendor, and the other goes to the IRS. This documentation helps confirm that your expenses and the vendor’s income line up. Your firm may also receive a 1099-K form, for payments received via credit, debit, or prepaid cards. 

Here’s a quick example:

1. Let’s say you hire a private investigator in March and pay them $2,500 over the year.

2. You record all payments to the investigator throughout the year.

3. In January, you prepare a 1099 form showing the $2,500 total.

4. You mail a copy of the 1099 to the investigator.

5. You file the same 1099 with the IRS, ensuring both your records and the investigator’s tax reporting match.

Do law firms get 1099s? 

Yes, law firms can get 1099s from clients or third-party payers, such as insurance companies, or your payment providers. Reconciling these forms with your own books is important so your reported income matches what others have reported to the IRS. You can file 1099s either by paper or electronically.

How to choose the right 1099 form

There are two main types of 1099s that lawyers may file: Form 1099-NEC, Nonemployee Compensation, and Form 1099-MISC, Miscellaneous Information.

Form 1099-NEC is used to report payments of $600 or more to independent contractors like freelance paralegals, expert witnesses, or investigators who are not your employees. 

Form 1099-MISC is for payments that don’t count as nonemployee compensation. You might issue this form for payments such as rent, royalties, or prizes. 

Conversely, your law firm may receive Form 1099-MISC if you collect gross proceeds from settlements or awards paid to a client through the firm. In both cases, the form ensures the IRS has a record of the transaction.

What are the 1099 filing dates for 2026?

For payments made in 2025, the Form 1099-NEC, and 1099-K filing deadline is January 31, 2026 (recipient + IRS), and Form 1099-MISC follows a different schedule. Here are the key dates for 1099 for legal fees and related filings:

If any of these dates fall on a weekend or federal holiday, the due date shifts to the next business day.

Who needs a 1099?

Any vendor or contractor your firm pays $600 or more in a calendar year generally requires a 1099 form. This rule applies whether the payment is for services, rent, or other qualifying expenses. Filing ensures that your firm’s expenses line up with the recipient’s reported income, reducing risk during tax season.

Here are the most common groups that you may be required to file 1099s for:

• Independent contractors and freelancers: This includes paralegals, investigators, or consultants who aren’t employees. Clear records, including accurate paralegal billing entries, make preparing 1099s easier.

• Law firms: When your firm hires another law firm for services and pays more than $600, you will issue a Form 1099-NEC regardless of the other firm’s tax status. Accurate payment records make it easier to stay compliant and prepare forms correctly.

• Expert witnesses: If payments to expert witnesses for testimony or research cross the $600 threshold, they may also require reporting. Since these professionals are usually independent contractors, they follow the same reporting rules as non-employees.

• Rent or royalties: Payments to landlords or property management companies for office space or royalties for certain works require a 1099-MISC. These payments may also qualify as a common tax deduction for attorneys.

• Other service providers: From stenographers and process servers to research consultants, anyone providing services outside your payroll may also require a 1099.

Who does not need a 1099?

Not every payment your firm makes requires a 1099. Understanding the exceptions is an integral part of law firm accounting and helps avoid wasting time on forms you don’t need to file.

Common groups that you don’t need a 1099 for:

• Corporations: You generally do not issue 1099s to corporations. If a vendor’s W-9 shows they file taxes as an “S Corporation” or “C Corporation,” you can exclude them. This also applies to LLCs that have chosen to be taxed as S Corporations.

• Full-time employees: Regular, full-time employees receive Form W-2, Wage and Tax Statement forms, not 1099s, since they withhold income tax, Social Security, and Medicare from these wages.

• Reimbursements: When deciding whether a vendor needs a 1099 form, don’t count reimbursements for office supplies, meals, or travel toward the total.

• Contractors paid through payroll: If you pay contractors using a payroll provider, the provider typically issues the 1099s. Check with your payroll service to confirm.

Frequent 1099 errors to prevent 

IRS shares general instructions for filing 1099-MISC, 1099-K, and 1099-NEC each year, but some errors can still slip through. These errors can lead to penalties, extra work, or mismatched records at tax time. That said, most errors are easy to avoid if you know what to look for. 

Common 1099 errors to watch out for:

• Filing the wrong form: Mixing up 1099-NEC and 1099-MISC is one of the biggest pitfalls. Use NEC for non-employee compensation (like independent paralegals or investigators) and MISC for rent, royalties, or gross proceeds to attorneys.

• Failing to meet local filing requirements: Some states, like Delaware and Massachusetts, require direct 1099 filing even if they’re part of the combined Federal/State filing program.

• Missing deadlines: The deadlines for NEC and MISC are different. Even if the form is correct, late filings can trigger fines.

• Reporting incorrect amounts: Forgetting to reconcile payments with invoices or mixing reimbursements into reportable income can throw off your totals.

• Incorrect vendor information: A wrong address or taxpayer ID from an incomplete W-9 can cause the IRS to flag your filing. Always double-check vendor details before submitting.

5 tips for managing 1099s for lawyers

With a few proactive steps, you can simplify the process, reduce errors, and keep financial record-keeping best practices on point. Here’s how:

1. Collect W-9s upfront

The simplest way to avoid 1099-K headaches is to collect W-9 forms before you pay any independent contractor, vendor, or expert. Waiting until January often leads to delays, missing information, or incorrect forms. 

Use digital tools to request and store W-9s throughout the year. This system can keep everything organized and prepare you for tax season. It also makes creating an effective legal invoice much smoother.

2. Keep detailed records

Maintain detailed payment logs and ensure all W-9s are tied to their corresponding 1099-eligible payments. You can use 8am LawPay to automatically generate clear payment histories. With reporting features like accounts receivable and trust account activity, it helps you track 1099-K legal payments and makes compliance easier.

Plus, you can easily connect LawPay to QuickBooks Online to sync payments, handle reconciliation, and keep your accounting accurate and current.

Learn more about LawPay’s financial reporting software

3. Document outreach to vendors

Sometimes, vendors don’t hand over W-9s right away. In those cases, make multiple outreach attempts via email or phone, and keep a log of every attempt. Documenting your effort shows due diligence and can help if the IRS audits your firm.

4. Correct errors quickly

Even small mistakes like a misspelled name, wrong tax ID, or inaccurate amount can cause significant filing issues. Double-check details before submission and correct errors immediately if they appear. You can also use LawPay dashboards for invoices, payments, and trust accounts to spot discrepancies early.

5. When in doubt, consult a tax professional

The line between an employee and an independent contractor isn’t always clear. The same goes for unusual payment types, such as settlement bonuses paid directly to a consultant, reimbursements bundled with service fees, or payments to an expert witness through a third-party entity.

That’s why professional tax guidance is crucial when you’re unsure. An accountant or tax advisor can help you navigate gray areas and make sure your filings hold up under scrutiny.

Make 1099 filing easier with LawPay

Managing 1099s doesn’t have to be stressful. By collecting W-9s upfront, keeping detailed records, and correcting errors quickly, your firm can avoid common pitfalls and stay compliant. 

LawPay helps you simplify payments, keep financial records organized, and generate reports like accounts receivable that make reviewing 1099-eligible payments easier. While LawPay isn’t tax software, these insights give your firm a clear view of payments and support accurate preparation for tax filing.

 Take the guesswork out of compliance and focus on serving your clients. Sign up today and join 150,000+ legal professionals who trust LawPay with their transactions.

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