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Learn more →If your business pays affiliates, you are paying people for a service, and the IRS wants to know about it. Form 1099-NEC ("nonemployee compensation") is how you report those payments. It replaced the old Box 7 of Form 1099-MISC in 2020 and is now the standard form for contractors, freelancers, and affiliates.
Anyone who is not your employee and whom you paid for services during the year, once their total reaches the threshold. For a referral or affiliate program, that means:
Rewards paid to ordinary customers for referring a friend are usually not services. They are typically treated as prizes, awards, or other income and belong on Form 1099-MISC instead. See affiliate payout for how programs handle both.
The reporting threshold is based on the year the payment was made, not the year you file:
The threshold applies separately to Form 1099-NEC and Form 1099-MISC. $500 of commissions and $1,500 of referral prizes do not combine to trigger either form. Amounts across several programs do combine when they are paid by the same payer and belong on the same form.
| Form 1099-NEC | Form 1099-MISC | |
|---|---|---|
| What it reports | Payment for services | Prizes, awards, other income |
| Typical program | Affiliate program | Customer referral program |
| Example | $1,200 in commissions to an affiliate | $700 in gift cards to a referring customer |
The distinction is why the person was paid, not what the program is called. A commission is compensation. A thank-you gift card is not.
Collect the form before the payout that would cross the threshold, not in January when you are trying to file. A program that pays out without a valid form on file has a problem it cannot easily fix later.
Form 1099-NEC is due to both the IRS and the recipient by January 31 of the following year. Filing late or with a missing tax ID carries penalties per form.
When commissions are paid through a card network or a third-party settlement service, the processor may report them on Form 1099-K. Check how each payout method is treated so the same commission is not reported twice. This page is general information, not tax advice; confirm your obligations with a qualified tax professional.
GrowSurf's Tax Center handles the paperwork for US companies that pay referral or affiliate participants. Turn on Tax Forms, add your payer's legal name and EIN, and GrowSurf collects Form W-9 from US recipients and Form W-8 from international ones on a secure hosted page inside the participant portal, on web or mobile. The reward or payout that reaches the threshold is paused until the form is complete, and GrowSurf never stores a full Social Security number.
GrowSurf classifies each payment by why the person was paid, so affiliate commissions become Form 1099-NEC candidates and customer referral prizes become Form 1099-MISC candidates. Same-form amounts combine across programs under one payer EIN while NEC and MISC thresholds stay separate. At year-end you review every recipient and amount, authorize e-filing, and track IRS acceptance from the Filing tab. Recipients get online access to their forms. You remain the payer of record, and GrowSurf does not provide tax advice.
In the US, yes, once an affiliate's commissions for the year reach the threshold ($600 for payments made in 2025, $2,000 for 2026 and later). Commissions are payment for services, which is exactly what Form 1099-NEC reports. Confirm with a tax professional.
1099-NEC reports payments for services, such as affiliate commissions. 1099-MISC reports prizes, awards, and other income, such as gift cards given to customers for referring a friend. The thresholds are tracked separately.
Yes. A gift card is income at its face value. For affiliates it counts toward 1099-NEC; for referring customers it usually counts toward 1099-MISC.
Collect Form W-8BEN (individuals) or W-8BEN-E (businesses) instead of a W-9. Foreign recipients generally do not receive a 1099, but you need the W-8 on file to document that.
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