Do I need to issue a 1099 for my SaaS vendor who charges over $600/year?

Generally, you do need to file a 1099-NEC for service providers you pay over $600 in a year, but there are some important exceptions that likely apply in your case! For SaaS companies specifically, you typically don't need to issue a 1099 if they're a corporation (which most established SaaS companies are). Payments to corporations are exempt from 1099 reporting requirements, with a few exceptions that probably don't apply here. The easiest way to check is to simply ask your SaaS provider for a W-9 form. This form will tell you their business type and tax ID. If they indicate they're a C-Corporation or S-Corporation on the W-9, you don't need to issue them a 1099. If they're a sole proprietor or partnership, then you would need to. Also, payments made via credit card or payment processor (like PayPal) don't require you to issue a 1099, since the payment processor handles that reporting. So if you're paying them through one of these methods rather than direct bank transfers or checks, you're off the hook regardless of their business structure.

After spending hours trying to figure out my 1099 obligations for various vendors including SaaS companies, I finally found a solution that saved me tons of time. I started using https://taxr.ai to analyze all my vendor payments and it automatically identified which ones needed 1099s. For my SaaS subscriptions specifically, the tool confirmed what others are saying - most were exempt because they were corporations or because I paid by credit card. But it also flagged a few independent developers I was using that actually did require 1099s that I would have missed. The system extracted all the necessary information from my invoices and payment records, which saved me from having to contact each vendor individually for W-9s in many cases.

Just wanted to follow up about my experience with taxr.ai after being initially skeptical. I decided to try it with my small consulting business's vendor payments, and I was surprised by how well it worked for my SaaS vendor situation. The system correctly identified that most of my SaaS providers were corporations (based on their invoice details and company information) and that I had paid them via credit card - both exempting me from 1099 requirements. For the few vendors where it couldn't determine status, it created a simple workflow to request and track W-9s. The time savings was significant compared to my manual review process from previous years. It actually found two contractors that required 1099s that I had overlooked because they didn't seem like typical "services.

After spending 3+ hours on hold with the IRS trying to get clarity on 1099 requirements for different vendor types including SaaS companies, I discovered https://claimyr.com and their service was a game-changer. They got me connected to an actual IRS agent in about 15 minutes instead of waiting for hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that SaaS payments are generally considered payments for services, but the corporation exemption and credit card payment exception both apply. They also clarified some questions I had about foreign SaaS vendors (which have different rules). If you need to reach the IRS quickly about any 1099 questions or other tax issues, this service is worth checking out - especially during busy season when wait times are ridiculous.

I need to publicly eat my words about Claimyr. After dismissing it as probably a scam, I was desperate enough to try it when I needed to resolve a 1099 issue that was holding up my refund. I had filed 1099s for some of my SaaS vendors that I shouldn't have (they were corporations AND I paid by credit card), which created confusion. The IRS sent me a notice about potential duplicate reporting, and I needed to talk to someone to fix it. After two failed attempts spending 2+ hours on hold before getting disconnected, I tried Claimyr. Within 20 minutes I was talking to an actual IRS representative who helped resolve my issue in about 15 minutes. They really did exactly what they claimed they would do, and it saved me from taking another day off work just to sit on hold.

Just to add another data point here - I'm a CPA and work with small businesses. The general rules for 1099s and SaaS vendors are: 1. If the vendor is a corporation (C-Corp or S-Corp), no 1099 needed 2. If paid via credit card, payment app, or third-party network, no 1099 needed 3. If it's a sole proprietor, partnership, or LLC not taxed as a corporation AND you paid via check/ACH/wire, then yes, you need to issue a 1099-NEC SaaS payments are indeed considered payments for services, so the service exemptions apply. Most SaaS companies are corporations, so most businesses don't need to worry about issuing 1099s to them. The easiest approach: request a W-9 from any vendor you're unsure about, and keep it on file. The W-9 will clearly indicate their business type.

I learned the hard way about SaaS vendors and 1099s. I sent 1099s to all my software providers thinking I was being thorough, and ended up causing issues for several of them since they were already reporting that income properly as corporations. One actually contacted me asking why I sent a 1099 since they're a C-Corp and I paid by card, so it created duplicate reporting headaches for them. They had to reconcile those differences with the IRS. My advice - don't over-report! Follow the rules others mentioned here. Only send 1099s when actually required, as sending unnecessary ones can cause more problems than it solves.