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Do I need to send 1099s to all my subcontractors?

You don’t need to send a 1099 to every subcontractor. The rules depend on how much you paid them, how they’re structured as a business, and how you made the payments.

The basic requirement is straightforward. If you paid $600 or more to a subcontractor during the year for services, you generally need to send them a 1099-NEC. Payments below that threshold don’t require reporting. The $600 applies to the total for the year, not per payment. Ten payments of $75 each to the same person adds up to $750, which crosses the threshold.

Corporate status matters. Payments to corporations, both C-corps and S-corps, typically don’t require a 1099. If your electrician runs an S-corp, you don’t need to file one for them. The major exception is payments to attorneys, which always require a 1099 regardless of their corporate structure.

Payment method also changes things. If you paid a subcontractor through a credit card, debit card, or a payment service like PayPal or Venmo, you don’t need to send a 1099. Those payment processors are responsible for reporting through a 1099-K instead. This catches a lot of business owners off guard because they think every payment over $600 needs reporting. It only applies to checks, cash, ACH transfers, and similar direct payments.

The only way to know whether your sub needs a 1099 is to have their W-9 on file. The W-9 tells you their legal name, tax ID, and most importantly, their business type. Get the W-9 before you make the first payment, not in January when you’re scrambling to file. Chasing down W-9s at year end is one of the most frustrating parts of running a business that uses subcontractors. If you work in skilled trades and construction, this is especially important because you might pay fifteen or twenty different subs throughout the year.

The deadline is January 31. The 1099-NEC must be sent to the subcontractor and filed with the IRS by this date. There’s no automatic extension, and penalties for late filing start at $60 per form and increase depending on how late you are. Miss enough of them and the penalties add up fast.

Track who you’ve paid and how much throughout the year. By December, you should already know which subs need 1099s and have their W-9s collected. Waiting until January creates unnecessary stress and mistakes. Small business bookkeepers can set up systems to track payments by vendor and flag anyone approaching the $600 threshold so nothing slips through.

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More Questions

What's the best way to track costs for each project?

The best approach is capturing every cost as it happens and assigning it to the right project in your accounting system. This means tracking labor hours, materials, subcontractor bills, and direct expenses separately for each job so you know your actual profit margin on every project.

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Do I need a business license to operate in Richmond?

Yes, you need a BPOL (Business Professional and Occupational License) to operate in Richmond. The annual fee is based on your gross receipts, and some industries require additional permits beyond the basic license.

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Should my restaurant use cash or accrual accounting?

Most small restaurants do well with cash accounting. It's simpler, matches cash flow reality, and the IRS allows it for businesses under $29 million in annual revenue.

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Can you help me migrate from QuickBooks Desktop to QuickBooks Online?

Yes, we regularly help businesses migrate from Desktop to Online. The process involves transferring your data, cleaning up historical entries, and getting you comfortable with the new system.

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Why is QuickBooks showing a different number than my bank account?

The most common reasons are timing differences, duplicate transactions from bank feeds, or reconciliation issues. Your QuickBooks balance includes transactions that may not have cleared the bank yet.

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What's the difference between bookkeeping and accounting?

Bookkeeping is the recording of financial transactions. Accounting is the analysis and interpretation of those records. Both matter for small businesses, but they serve different purposes and happen at different rhythms.

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