If you, as a business, pay another business more than $600 in a year, you must issue a1099-NEC, regardless of the method of payment. Certain businesses are exempt, like S-corporations. You are required to give the contractor a W9 form, to collect their Social Security number or federal tax number. If they claim to be an exempt type of company, they will check the box on the form W9 and return it to you and you must keep that with your other business records for at least six years, in case you were audited, to prove why you did not issue a 1099 yourself.
(The rules about 1099-Ks apply if you hire a contractor via UpWork or Patreon and pay the intermediate company. If you pay the contractor directly, you must issue the 1099-NEC.)
You report the gross amount that you paid. If the contractor received less than the gross amount due to service charges or other fees, they will deduct that as an expense on their tax return.
