Paid a Contractor by Card or PayPal: 1099-NEC or 1099-K?

October 17, 2026 · 2 min read

General information, not tax, legal or financial advice. We are not the IRS. Check IRS.gov or a qualified tax professional. Sources read on October 17, 2026. Dates and amounts after 2026 are expected. Examples use made-up numbers. This page contains no affiliate links.

Short answer: The IRS instructions say payments made with a credit card or payment card, and certain other payments including third-party network transactions, must be reported on Form 1099-K by the payment settlement entity under section 6050W, and are not subject to reporting on Form 1099-MISC or Form 1099-NEC.

What that means for you as a payer

• If you paid a contractor by card or through a payment app that is a third-party network, you generally don't include that amount when deciding whether you owe a 1099-NEC.
• Amounts paid by check, bank transfer or cash remain reportable if you reach the threshold.
• If you paid one contractor partly by card and partly by check, only the non-card portion counts on a 1099-NEC; keep records showing how each invoice was paid.

(The partial-payment point is our reading of the IRS rule, not an example the IRS gives.)

What the contractor still owes

Not receiving a 1099-NEC doesn't make the income non-taxable; the contractor reports it as self-employment income. See 1099-NEC vs 1099-MISC vs 1099-K.

Practical steps

1. Record the payment method on every invoice.
2. Collect a W-9 anyway for payments you expect to report.
3. Check the current IRS text each year; reporting thresholds for 1099-K have changed repeatedly.

FAQ

Does the app's own 1099-K replace my duty?

For card/network payments, the IRS says the settlement entity reports them.

What about gift cards or crypto?

Not covered in what we read.

What we could not verify