If you hire contractors or freelancers in your business, understanding 1099s is essential. Not sending the correct forms can lead to IRS penalties—and a lot of stress you don’t need.

Maybe you just wrapped up a busy, rewarding Q4 or you finally got to relax and enjoy the holidays. Either way, January rolls around and suddenly 1099s are due. *Cue slight panic* 

But the good news: you don’t have to be a tax expert or spend hours researching tax forms. In fact, you may not even need to send them. In fact, depending on who you've hired, you may not need to send anything. 

Let's break this down in a clear, simple way and make this whole thing a lot less scary, so the next time 1099 season sneaks up, you're totally prepared (and way less stressed). 

What is a 1099? 

There are several types of 1099s, and if you have ever been a contractor or held investments, you have probably received one. 

However, when paying contractors, this will always be a 1099-NEC and is most often what people refer to when talking about 1099s. For the purposes of this article, we will focus on 1099-NEC’s. 

Essentially, you need to send a 1099-NEC to anyone who worked for you as a contractor or freelancer and provided a service that you paid for with more than $600 cash. The purpose of this tax form is to report to the IRS and the contractor how much you paid them over the course of the last calendar year. 

To clarify, you only need to send 1099s if you are operating a business. For example, if you (as an individual) had repairs completed to your house, you would not send a 1099 to those contractors. BUT if you (as a business) had repairs completed to an office space, you would send a 1099 to those contractors. Keep this in mind and remember 1099's are issued for payments made as part of your trade or business only, not because you, as an individual, hired a contractor for personal reasons.  

What is considered a service? 

With 1099 filings, a service means anything along the lines of a professional service. 

Examples of services: 

• Maintenance & Repair Services
• Virtual Assistant 
• Web Developer 
• Photographer 
• Cleaning Services 
• Consulting and Advising Services 
• Bookkeepers / Accountants / CPAs / Financial Services 
• Landscaping Services  
• Attorneys / Lawyers / Legal Services (important side note: regardless of incorporation or not, legal services paid for should have a 1099 filed) 

Do I need to send a 1099? 

To keep it simple, generally speaking: 

YES, you should a 1099-NEC if all of the following apply to a contractor: 

• You paid someone $600 or more in CASH during the year (CASH = cash, checks, Zelle, Venmo, bank transfers)
• They are not an employee 
• They are an individual, sole proprietor, or LLC 
• They provided a service to you for business purposes 

NO, you usually don’t need to send a 1099-NEC if any of the following apply: 

• The contractor is an S-Corp or C-Corp (incorporated) 
• You paid via credit card, PayPal goods & Services, or a payment platform that issues its own 1099-k (think Fiverr, Upwork) 
• You paid them less than $600 during the year 

Common Mistakes People Make with 1099s 

Not collecting W-9s in advance: W-9s are a form contractors fill out that provide their legal name, tax ID number, and business structure. It’s best to ask a contractor to fill these out when you hire them!  

Sending 1099s to corporations: If a contractor selects S-Corp or C-Corp on their W-9, you typically do not need to send them a 1099-NEC 

Sending 1099s to vendors who did not provide a service: 1099s are only for services, not goods or product suppliers. 

Waiting until January to figure this out: Waiting until January to start this process, clean up your books, and track down tax info is going to be stressful. Just ask me how I know (wink wink)  

Key Deadlines to Remember: 

• Send 1099-NEC’s to contractors by January 31st 
• File 1099-NEC’s with the IRS (paper or e-file) by January 31st 
• NOTE: the only time these deadlines change is when January 31st is on the weekend, then the deadline changes to the next business day (Monday) 

How can I file 1099-NECs? 

• If you have a payroll service (i.e. Gusto) they may have the option to file and send through their platforms 
• There are several other great platforms out there as well. QuickBooks allows you to file directly through their platform. Track1099 or Tax1099 are also very popular. 
• These can still be filled out and sent in by hand (although it may take a while and I would really only recommend this as a last resort) 

4 Steps to make 1099s way easier next year 

So maybe you've had to stress and scramble in the past or just prefer to get a jump start on this. Here’s how to set yourself up for a stress-free 1099 season next year: 

1) Collect W-9’s as part of your contractor onboarding
This will save you so much time and help identify which contractors should receive a 1099-NEC. 

2) Use a separate business bank account 

This keeps everything clear and easy to track. (Need help with this? I wrote this post for you). 

3) Track contractor payments in your accounting software 

 If you’re using QuickBooks, Xero, or even a spreadsheet - make sure those payments are clearly labelled. 

4) Plan in advance if you plan to work with a bookkeeper 

Seriously, if the idea of filing 1099s or trying to sort this out creates a lot of stress, let’s team up. 

Final Thoughts 

1099s don’t have to be scary, confusing, or a last minute scramble. Keep the deadlines in mind and actively collect W-9s as you hire contractors throughout the year. And remember, you’re only filing 1099s for contractors who provided services and were paid by you in cash for $600 or more. 

The content on this website is for informational purposes only and does not constitute financial, tax, accounting, or legal advice. Reading blog posts or other materials on this site does not form a professional relationship. Services are only provided under a signed engagement agreement. You should consult with a licensed professional before making any decisions based on the information provided.