A Practical Look At 1099s

If you run a business, there’s a good chance 1099s land on your to-do list every January. They aren’t glamorous, and they aren’t anyone’s favorite task. But they matter, and a simple, practical approach saves you time, money, and stress.

1 So, what is a 1099?

A 1099 is a tax form used to report certain payments made to non-employees. You’ll commonly issue one to people like:

• Independent contractors
• Freelancers
• Virtual assistants
• Consultants and marketing professionals
• Bookkeepers, designers, and website developers

When people mention 1099s, they’re usually talking about the 1099-NEC, which reports non-employee compensation.

2 When are you required to issue one?

In general, you’ll need to issue a 1099-NEC when all of these are true:

• You paid someone $600 or more during the year
• They are not your employee
• You paid them by cash, check, or bank transfer

There are exceptions and special situations, so if you’re unsure, ask. Clarifying now is far easier than fixing a filing later.

3 What to gather now, so filing is easier later

A little prep goes a long way. Before you file, make sure you have:

• A completed W-9 from each contractor
• The total amount you paid them for the year
• Their legal business name and current mailing address
• Whether they’re an individual, LLC, or corporation

4 Why 1099s matter

1099s aren’t just another form the IRS makes you file. They help make sure income is reported correctly, and when they go missing, penalties can add up quickly.

Filing accurately and on time:

• Keeps your records clean
• Reduces the risk of notices and penalties
• Protects your business from avoidable headaches