A 1099-NEC is a tax form used to report payments made to independent contractors or self-employed individuals. If you paid someone for services (and they’re not your employee), you may be required to send them a 1099 and file a copy with the IRS.
This form helps the IRS ensure that income is properly reported on both sides.
You paid someone $600 or more during the year (this amount can change each year so double check this is still the correct amount in the current filing year)!
The payment was for services (not products or merchandise)
The person or business is not your employee
You paid them using cash, check, ACH, or direct deposit
The contractor is a sole proprietor, independent contractor, or certain LLCs
Common examples include:
Designers, photographers, or editors
Virtual assistants or admin support
Guest instructors or collaborators
Consultants or coaches
If you hired help to support your business, there’s a good chance a 1099 applies.
When You DO NOT Need to Issue a 1099
There are several common situations where a 1099 is not required:
You paid a corporation (most C-corps and S-corps) or an LLC that has tax classification as an S-corp (an LLC-S)
You paid someone less than $600 total for the year
You paid via credit card, PayPal, Stripe, or other third-party processors
You paid for products or physical goods only
You paid employees (they receive a W-2 instead)
The vendor is not US - based
Payment processors like PayPal and Stripe handle their own reporting through a 1099-K, so you don’t issue a separate 1099 in those cases.
Before paying any contractor, you should collect a W-9 form. This gives you:
Their legal name
Business structure
Tax ID number
Having this information early makes the 1099 season much smoother and helps avoid last-minute stress in January.
Failing to issue required 1099s can lead to:
IRS penalties
Notices or letters
Extra work correcting past filings
The good news is that mistakes can often be corrected - especially if they’re caught early. Staying organized throughout the year makes this process much easier.
A few simple habits can save you time and stress:
Track contractor payments consistently. If your accounting software gives the option, select to track payments to these vendors as 1099 eligible
Use clear expense categories
Keep W-9s in a dedicated folder
Review contractor totals before year-end
1099s aren’t just a tax task - they’re closely tied to good bookkeeping!
As your business grows and you start working with contractors, understanding 1099 requirements becomes increasingly important. Even a basic system for tracking payments and collecting W-9s can make a meaningful difference when it’s time to file. Staying informed and consistent is often all it takes.
Our team at Accounted For Consulting helps small business owners set up clear systems and files for tracking contractor payments and preparing 1099s. If you’re unsure how to organize things or want support meeting deadlines, we can help.