The $600 rule for agency contractors
If your agency paid a freelancer, media buyer, designer, copywriter, developer, or white-label partner $600 or more for services during the calendar year, and they are a US person operating as an individual, sole proprietor, LLC, or partnership, you are required to file Form 1099-NEC reporting the total. This is not optional and not tied to whether the contractor asks for it. It applies to exactly the contractor-heavy model most agencies run, so a typical agency files a stack of them every January.
The information you need comes from Form W-9, which is why collecting one from every contractor before their first payment is the single best habit here. Chasing tax IDs in late January from a contractor who has stopped responding is a rite of passage no agency owner needs twice.
Jan 31, and how the filing actually works
The deadline is Jan 31 following the tax year: contractor copies delivered and the IRS filing made by that date. Most agencies file electronically through payroll or accounting software, or directly through the IRS IRIS system, which is free. Note that once a business files 10 or more information returns in total for the year, electronic filing is mandatory, a threshold a contractor-driven agency crosses immediately.
Penalties for late or missed 1099s are per form and scale the longer they slide, and intentional disregard is dramatically more expensive. There is also a strategic reason to file cleanly: your contract labor deduction on Line 11 is easiest to defend when it reconciles against the 1099s you issued. Big contractor deductions with no 1099s behind them are a natural audit question.
Corporations, card payments, and the other exceptions
Not every contractor gets a form. Payments to C corporations and S corporations are generally exempt from 1099-NEC reporting, which is why the W-9's entity-type box matters; an LLC taxed as an S corp counts as a corporation for this purpose. The famous exception to the exception: payments to attorneys get reported regardless of entity type.
Payment method matters too. Amounts you pay by credit card, or through third-party settlement platforms like PayPal business payments, are excluded from your 1099-NEC; the card processor reports them on Form 1099-K instead. So an agency paying its contractors exclusively by card may legitimately have fewer 1099-NECs to file, while ACH, checks, wires, and direct bank transfers all stay on you. Foreign contractors performing services outside the US get no 1099 at all; collect Form W-8BEN and keep it on file instead.
The end-of-year routine, then: pull total payments per contractor, drop everyone under $600, drop corporations (except attorneys) and card-paid amounts, and file 1099-NECs for the rest by Jan 31. With W-9s collected up front, the whole exercise takes an afternoon.