What Is a 1099 and Who Needs One?
Your no-nonsense guide to 1099s as a small business owner
If you’re a small business owner who works with contractors, freelancers, or other independent service providers, chances are you’ve heard of Form 1099 and you might be wondering if you’re supposed to send one.
This guide breaks it down: what a 1099 is, who gets one, and how to know if you need to file them.
What Is a 1099?
A 1099 is an IRS tax form used to report income that isn’t from a W-2 job. There are several types of 1099s, but the most common for small business owners is the 1099-NEC short for “Nonemployee Compensation.”
If you pay someone who isn’t your employee like a contractor, virtual assistant, graphic designer, or handyman and you paid them $600 or more in a year, you’re probably required to issue a 1099-NEC.
Who Gets a 1099?
Issue a 1099-NEC if you paid:
$600 or more during the year
To an individual, sole proprietorship, or partnership
For services (not goods)
Via cash, check, Venmo, Zelle, or direct deposit
Do not issue a 1099 if:
You paid them with a credit card, PayPal Business, or Stripe (those processors issue a 1099-K instead)
They’re a C-Corp or S-Corp (unless it's for legal or medical services, which still require 1099s)
You paid less than $600
What’s on the 1099?
A 1099-NEC form shows:
The total amount you paid them for the year
Your business info (name, address, EIN)
Their info (name, address, SSN or EIN)
You send:
Copy B to the contractor (by January 31)
Copy A to the IRS (also by January 31)
How Do You Know Who to Send It To?
At the beginning of working with any contractor, you should collect a W-9 form from them. This form gives you all the info you need to issue a 1099:
Their legal name
Their business structure
Their SSN or EIN
Their mailing address
If you don’t have a W-9, ask for one ASAP — you can’t file a 1099 without it.
Why It Matters
The IRS uses 1099s to match income between what businesses report paying and what contractors report earning. Failing to file them can result in:
Penalties (starting at $60 per form and going up based on lateness)
IRS scrutiny or audits
Headaches for you and your contractors at tax time
Final Thoughts
1099s are a simple but important part of staying compliant as a business owner. If you’re working with non-employees, it’s your job to make sure their income is reported correctly.
Quick recap:
Paid a contractor $600+ this year?
Paid via non-credit method?
Not a corporation?
You probably owe them a 1099.
Need Help Filing 1099s?
I help small business owners:
Review who needs a 1099
Prep and send 1099-NEC forms through QuickBooks Online
Stay compliant and organized before the deadline
Contact us by click here
or send us an email at David@RuckandReconcile.com
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And as always, thanks for reading and we’ll see you next week!