What Is a 1099 and Who Do I Need to Send One To?

2 days ago

3 min read

A 1099 is an IRS information form that reports money your business paid to someone who isn't your employee — most commonly a Form 1099-NEC for contractors. The general rule: if you paid an independent contractor $600 or more for services during the year, you usually have to send them a 1099 and file a copy with the IRS. It's how the IRS tracks income that doesn't come through payroll. Getting this right keeps you compliant and keeps your contractor relationships clean.

Here's what a 1099 is and who needs to get one from you.

Small business owner organizing tax paperwork

What a 1099 actually reports

A 1099 reports payments made outside of payroll. For most small businesses the relevant one is the 1099-NEC, which reports “nonemployee compensation” — money you paid contractors, freelancers, and other service providers. Unlike a W-2 for employees, a 1099 doesn't involve withholding; it simply documents what you paid.

The contractor uses it to report their income, and the IRS uses it to match what they received against what they report.

Who gets one — the $600 rule

The common trigger is paying a non-employee $600 or more for services during the year. The IRS's guidance on whether you're required to file a 1099 walks through the situations that require one, and its overview of reporting payments to independent contractors covers the 1099-NEC specifically.

Payments to most corporations are often exempt, and there are exceptions — which is exactly why collecting details up front matters.

Make it easy on yourself

The trick to a painless January is collecting a Form W-9 from every contractor before you pay them. That gives you their legal name, address, and taxpayer ID up front, so you're not chasing information when forms are due. Keep a running list of who you paid and how much.

A little organization during the year turns 1099 season from a scramble into a five-minute task.

Where the how comes in

Knowing which forms you owe, to whom, and when — and keeping the records to file them easily — is part of running a business that stays on the right side of the IRS. The Business Starter Program helps you set up finances and recordkeeping that make tax obligations simple.

This article is general information, not tax advice. 1099 rules have exceptions and thresholds that can change — check the IRS resources above or a qualified tax professional for your situation.

Frequently asked questions

Who do I need to send a 1099 to?

Generally any non-employee you paid $600 or more for services during the year — contractors, freelancers, and similar. Payments to most corporations are often exempt.

What's the difference between a 1099 and a W-2?

A W-2 is for employees and involves tax withholding; a 1099 reports payments to non-employees with no withholding. Which one applies depends on worker classification.

How do I get the info I need to file a 1099?

Collect a Form W-9 from each contractor before you pay them. It captures their legal name, address, and taxpayer ID so filing is straightforward.

Want tax season to stop being a scramble?

This article covered the what and the why. The Quicke Business Collective's Business Starter Program walks you through the how — setting up the finances, records, and simple habits that keep your tax obligations under control.

👉 Join the Business Starter Program