Small business owners spend a lot of energy on the 1099s they receive and comparatively little on the ones they are required to send. If you paid subcontractors, a bookkeeper, a landlord, or a lawyer this year, the second question matters as much as the first.
Who has to issue 1099s
Any trade or business that pays a non-employee for services in the course of that business, once payments to that person for the year reach the reporting threshold, generally has to issue a 1099-NEC. The obligation applies to sole proprietors, LLCs, partnerships and corporations alike. It does not apply to personal payments — hiring someone to fix your own roof is not a business expense and creates no reporting duty.
Rent paid to a landlord and certain other payments fall under the 1099-MISC. Attorney fees have their own rules and are reportable even when the law firm is incorporated.
Who does not get one
- Corporations, generally, with the attorney exception noted above. An LLC taxed as a corporation counts as a corporation for this purpose — which you only know if you asked.
- Employees, who get a W-2 instead.
- Vendors you paid for goods rather than services — the lumber yard, the supply house.
- Payments made by credit card or through a payment processor, because the processor reports those on a 1099-K. Paying a contractor by card actually shifts the reporting burden away from you.
The W-9 is the whole game
Form W-9 is what you ask the contractor to fill out. It gives you their legal name, their business name if different, their entity type, their address and their taxpayer identification number. With a completed W-9 on file, preparing a 1099 in January takes minutes. Without one, you are chasing a subcontractor who finished the job in March and no longer answers the phone.
The rule we give every client: no W-9, no first check. Make it part of onboarding a new sub or vendor, the same way you collect their insurance certificate. If someone refuses to provide a TIN, the rules require you to withhold from their payments, which is a conversation nobody wants to have after the fact.
Deadlines and how they get filed
1099-NECs go to the recipient and to the IRS early in the year, on a deadline that comes sooner than most other tax filings. Businesses filing more than a small number of forms are required to file electronically. The IRS provides a free filing portal for this, and most bookkeeping software will prepare and file them directly from your contractor payments — provided the contractors were set up correctly in the software all year.
What happens if you skip it
Penalties apply per form, for filing late, for not filing, and for filing with an incorrect or missing TIN. The amounts step up the longer the delay. More practically, the IRS cross-checks contract labor deductions on your Schedule C against the 1099s it received from you. A large contract labor deduction with no corresponding 1099s is a pattern that invites a letter.
There is also a question on the business tax forms asking directly whether you made payments that required 1099s and whether you filed them. Answering it honestly when the answer is "no, I didn't file them" is not comfortable.
A simple year-round system
- Collect a W-9 from every new service vendor before paying them.
- Set them up in your bookkeeping software as a 1099 vendor at the same time.
- Pay by a method you can trace — check, ACH or card — rather than cash.
- In early January, run the 1099 report, review it, and file.
This is part of what we set up when we take on bookkeeping and small business clients. If you are running a trade or service business anywhere from Weatherford to Granbury and the W-9 folder is empty, get in touch before the deadline gets close.
A January that takes twenty minutes
The whole process is simple when the pieces are in place before December. A signed W-9 in the file for every unincorporated vendor. A bookkeeping category or tag for contractor payments so the year-end total is a report, not a reconstruction. A note of who was paid by card or payment app, since those payments are generally reported by the processor rather than by you. With those three things done, the forms themselves are a short task, and the deadline that catches so many small businesses off guard passes without incident.
We handle 1099 filings for small businesses across Weatherford, Willow Park and Parker County alongside their returns. If you paid contractors this year and are not sure who needs a form, that is the question to ask before January, not after.
This article is general information, not tax advice. Thresholds, forms and rules change from year to year, so confirm the details for your own situation before you file.
Paid contractors this year? Call RD Precision Tax Service in Weatherford at (817) 480-6649, or request a free estimate. Robert has prepared returns for clients across Weatherford, Parker County and the surrounding North Texas counties since 2017.
This article is general information, not tax advice, and tax rules change from year to year. Confirm current-year figures and talk with a professional about your specific situation before acting.
Common questions
Do I have to send a 1099 to a contractor I paid in cash?
Yes, if the payments reached the threshold. The payment method does not change the requirement, except that card and processor payments are reported by the processor instead. Cash payments with no 1099 and no records are the hardest deduction to defend.
The contractor is an LLC. Do they still get a 1099?
Usually yes. An LLC taxed as a sole proprietorship or partnership gets one. An LLC that has elected corporate taxation generally does not, which is why the entity box on the W-9 matters.
What if a contractor will not give me a W-9?
The rules require backup withholding from their payments when a TIN is not provided. In practice, the easier answer is to make the W-9 a condition of the first payment so it never comes up.
Can I still deduct the payment if I did not issue a 1099?
The expense is deductible if it was a genuine business expense and you can substantiate it, but failing to file the required forms carries its own penalties and makes the deduction more likely to be questioned.
Have a question about your situation?
Robert prepares returns for individuals, contractors, and small business owners across Weatherford, Aledo, Willow Park, Springtown, Mineral Wells, and the rest of Parker County. Bring your questions — the first conversation is free.