Did you pay a contractor this year? Here’s what the IRS expects from you.
If you’ve paid freelancers, contractors, or service providers, 1099 rules apply whether you’ve thought about it yet or not. Here’s the plain-language checklist, the mistakes that trigger penalties, and what to collect now instead of in a panic later.
Educational resource only, not legal or tax advice. If your situation is more complex, confirm specifics with your tax professional.
List who you paid
Contractors, freelancers, virtual assistants, marketing help, IT, consultants, anyone outside your payroll.
Get a W-9 before you pay
It’s the single easiest way to avoid scrambling for missing information at year-end.
Review it now, not later
Filings are due January 31. The earlier you check, the less stressful that deadline feels.
What you’re required to collect
- A W-9 before you pay an independent contractor. If you can’t get a taxpayer ID, you may be required to withhold 28% as backup withholding and send it to the IRS.
- Complete information, not partial. A missing TIN, SSN, or EIN is one of the most common triggers for IRS penalties.
- A written agreement. Not strictly required for the 1099 itself, but a simple work order protects you if a relationship is ever questioned.
Where business owners get tripped up
- Paying a contractor first, then chasing the W-9 months later.
- Not tracking totals when one contractor is paid through several methods.
- Assuming “my CPA will catch it” without anyone having complete vendor records.
- Treating 1099-Ks and 1099-MISCs as the same form when income is split across both.
Who actually receives a 1099
This is the part most owners get wrong, not because the rule is complicated, but because it’s easy to assume instead of check.
Non-corporate service providers paid $600+
Sole proprietors, partnerships, and most LLCs taxed as either typically require a 1099.
Corporations are usually exempt
You generally don’t issue a 1099 to a corporation, but it’s still worth having anyone who claims that status complete a W-9 to confirm it.
Exception: attorneys
Legal fees generally require a 1099 regardless of dollar amount or entity type. There’s no minimum threshold here.
Fast answers
What’s the real difference between an employee and a contractor?
Employees work under your direction, meaning you control the hours and conditions, and you withhold payroll taxes. Contractors control how and when they work and invoice you for results. The distinction matters because misclassifying someone carries its own penalties, separate from 1099 filing itself.
What if a contractor won’t give you a W-9?
You may be required to withhold 28% of what you pay them as backup withholding and send it to the IRS. It’s an uncomfortable conversation to have after the fact, which is exactly why it’s easier to ask before the first payment goes out.
When are 1099s actually due?
Most 1099 forms need to be filed with the IRS and provided to contractors by January 31. Waiting until that month to start gathering information is the single biggest reason filings get rushed, incomplete, or wrong.
What about 1099-Ks from credit cards, PayPal, or Stripe?
Payment processors issue 1099-Ks for card or platform payments, while you typically issue a 1099-MISC for anything paid by check or cash. That means one contractor’s income can legitimately show up split across two different forms, and both need to reconcile.
Why review this now instead of waiting until January?
The hard part is never the form. It’s gathering accurate vendor information: W-9s, totals, current addresses. Doing that while things are calm keeps you out of the year-end scramble and catches gaps while there’s still time to fix them.
Not sure where your 1099s stand? Let’s look together.
If you’re already a bookkeeping client, this is usually part of what we manage for you. If you’re not, a short conversation is enough to tell you exactly where you stand and what’s left to do.
- We’ll tell you who actually needs a 1099 in your specific situation.
- We’ll flag any missing W-9s or vendor information before it becomes a January problem.
- No pressure, no obligation. Just clarity.
Get in touch about your 1099s
Fill this out and we’ll follow up to talk through your situation.
Want help beyond 1099 season?
1099 filing is one piece of staying organized year-round. If your books need more consistent attention, our bookkeeping support covers this and a lot more.