# 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").
- **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](https://www.irs.gov/forms-pubs/about-form-1099-nec)) or your tax advisor for more information and any best practices.