1099-NEC for Agent/Agency Commission Payments

Why do we use Form 1099-NEC?

Commission payments are compensation for services.

• 1099-NEC: Used for non-employee service payments (including direct bank transfers/ACH).
• Note: the 1099-MISC/K form is generally not applicable. It covers categories like rent, royalties, or third-party card processing platforms, which according to current IRS guidelines does not apply to standard insurance commission payouts.

What is the reporting threshold for 2026?

The threshold is presently set at $2,000 per payee/year. Payments below this amount do not require a 1099-NEC.

Who is reportable vs. exempt?

• Reportable: Individual agents, sole proprietors, partnerships, and LLCs taxed as partnerships ("P").

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  Exempt: C-corps, S-corps, and LLCs with corporate tax elections ("C" or "S").

• Note: consult the IRS or your tax advisor with any questions around reportability.

How do I determine tax status?

Review Line 3a of the applicable Form W-9 containing the tax classification checked:

• Reportable: "Individual/sole proprietor," "Partnership," or "LLC" with "P".
• Exempt: "C Corporation," "S Corporation," or "LLC" with "C" or "S".
• Note: the business entity name may not be applicable in all circumstances.

What is the intake process?

1. Collect a signed W-9 before the first payment

2. Verify Line 3a to confirm if the payee is reportable or exempt.

   1. Note: confirm Line 1 matches the TIN (use the individual owner's name for sole proprietorships or disregarded entities) to prevent mismatch errors.

Where can I go for more information?

This FAQ is intended to be an informational overview and not a comprehensive guide for the applicability or use of the 1099-NEC form. Please consult the IRS (Official Instructions) or your tax advisor for more information and any best practices.