As a tax preparer/instructor, I can say that you, Peter, did the RIGHT thing. You must reprot on form 1099-MISC any payments to a contractor of $600 or more. You can be in violation of IRS rules and also be penalized for not issuing the form along with not being able to claim the expense of the payment. The correct tax preparation software can and should be able to work around this issue and help your client to NOT be double taxed. Check with a tax professional before ceasing to issue this vital document. More and more people are being required to issue 1099 s of various kinds as the IRS wants to stop under the table transactions. To bad the honest tax payer gets caught in the cross fire but with proper information you and stay safe.