What's different here
- The attorney exception. Payments of fees to an attorney or law firm are reportable on 1099-NEC even when the firm is a corporation (IRC 6045(f)). Most AP systems default corporations to "no 1099"; law firms need the override, and the W-9 that says "C corporation" is not a reason to skip the form.
- Gross proceeds to attorneys. A settlement check payable to a law firm (or jointly to the firm and the client) is reported on 1099-MISC box 10 as gross proceeds, for the full amount, whether or not the firm keeps any of it. The firm then reports what it pays out. The payer reports the whole check; it does not net out the client's share.
- The claimant's 1099. Whether the plaintiff also gets a 1099 depends on what the settlement is for: physical-injury damages are excludable and not reported; back pay is wages (W-2); punitive damages, interest and most non-physical-injury damages are reportable on 1099-MISC box 3. The settlement agreement's allocation drives the forms, which is why tax counsel reviews it before signing.
- Trust-account payments. A firm paying experts, court reporters, investigators and co-counsel from its IOLTA or trust account is the payer for 1099 purposes, and those payees need W-9s like any other. Firms routinely miss this because the money "belongs to the client."
- Referral fees and co-counsel are nonemployee compensation to the receiving attorney or firm, corporate or not.
A process for firms and for the companies that pay them
- Companies: tag every law-firm vendor as "attorney" in the vendor master so the corporate exemption is bypassed for NEC and box 10 reporting; collect the W-9 and verify the name/EIN pair (law-firm legal names and DBAs diverge often).
- Companies: route settlement payments through a checklist that records the allocation, the payee(s) on the check, and the form each will receive.
- Firms: collect W-9s from every trust-account payee at engagement, run TIN matching, and treat the firm's own 1099 filing as a compliance function, not a bookkeeping afterthought.
- Both: keep the solicitation log; the IRS matches law-firm 1099s like any other and the CP2100 arrives the same way.