Fast FAQs about filing 1099s for your business
Disclaimer: Please consult with your Accountant on tax matters.
What is a 1099?
A 1099 is a form used to report income or payments between a contractor or vendor and a client for taxes in the United States. The 1099 is used to report NON-employee income and payments.
the different types of 1099s
Most likely, if you are a small business owner, the only two types of 1099 forms that you will need to file are a 1099-NEC or a 1099-MISC. NEC stands for Non-Employee Compensation, while MISC stands for miscellaneous.
The 1099-NEC is used when services are exchanged. Here are some examples:
You paid a web designer to update your website. You'd file a 1099 reporting how much you paid them.
You provided social media management for a client. They'd provide you with a 1099 showing how much they paid you.
You provided 1:1 business consulting for a coach. The coach is responsible for filing and sending you a 1099.
In contrast, a 1099-MISC (miscellaneous) form is used for reporting miscellaneous payments. For example, if you are an affiliate with a specific platform and you've received compensation from them. Here are some examples:
You're an affiliate with Honeybook. They are responsible for sending you a 1099-MISC reporting the amount you made through your affiliate link.
You're a Creator on Facebook. Facebook is required to send you a 1099-MISC reporting the amount they paid you.
You're monetized on YouTube. YouTube has to send you a 1099-MISC showing the amount of money you made through their platform.
Who files the 1099 for tax purposes?
The person or business entity who paid the expense is the one who files the 1099. They are responsible for filling out the form, reporting it to the IRS, and sending a copy to the contractor they paid.
Filing 1099s as a Business Owner
What is the difference between a W2 and a 1099?
Both a 1099 and a W2 report your income to the IRS and give you documentation that you can use to file your taxes. However, a 1099 is used for Non-employee compensation or contractor compensation, whereas a W2 is used for Employee compensation.
How do I know which to file?
Hopefully, you have a bookkeeper or accountant helping you make this decision, as it varies from business to business. I consult with my Accountant for all these types of decisions, and I highly recommend you do the same! In general, if you have employees on payroll, you'll be filing a W2, and if you paid contractors or freelancers to do work for you in your business, you'll likely be filing a 1099-NEC.
If you have employees on payroll, you usually have an entire system set up to pay your employees on time, which is compliant with local labor laws. In short: You'll know if you need to file W-2s!!
What do I need to file a 1099?
In order to file a 1099, you need specific information about the contractor for which you're filling out the form. For example, their full legal name or business name, their address, and their taxpayer identification number (TIN). Their TIN could be an employer identification number (EIN), or it could be their social security number (SSN) depending on how their business is filed. You should be able to get all of this information via a W9 that the contractor supplies to you (see next section).
As soon as I hire a new contractor, I immediately request a W9 from them and keep it on file for them - essentially, in their folder in Google drive. If you use a system for bookkeeping, you may also be able to upload their W9 there, or send them a link to fill out the information they'd normally put on their W9. For example, Quickbooks allows you to enter each of your Contractors and send them a request for their information directly inside the platform.
If you are filing paper forms, you will also, of course, need the actual forms, which you can get on the IRS website at irs.gov. If you use a platform like QuickBooks, Freshbooks, Wave, or Xero, they may be able to e-file your 1099s for you. (Keep reading!)
Three Ways to File 1099s + Important Deadlines
Regardless of which of the methods you use below, 1099-NECs must be filed by January 31. It's also the last day to mail copies of the 1099-NEC forms to your contractors.
The first way to file your 1099s is printing, filling out, and mailing in the paper forms. As a coach, service provider, etc, you'll most likely need the 1099-NEC, located here. You can find all the instructions for filing on the IRS website here. IMPORTANT: If you are filing more than 10 forms you are now required to e-file.
The second way to file is to e-file for free using the IRIS system on the IRS website. PLEASE NOTE: You'll have to apply for a Taxpayer Portal first!
The easiest and fastest way to file your 1099s is by using a bookkeeping system, although there may be some small fees associated with doing so. Read on!
Using your Bookkeeping System to file 1099s
The third way to file your 1099s is by using your bookkeeping or payroll tool. Assuming you have been keeping up with your Bookkeeping all year, this will only take a few minutes and usually is very affordable.
For example, I use QuickBooks and I only paid about three dollars or so per person to file and send a 1099 to each of my Virtual Assistants. Because I've been keeping up with my bookkeeping all year, QuickBooks already had a record of how much I paid to each of my contractors. It was easy to follow the instructions in their Help article and file the 1099s. QuickBooks makes it easy, doing both the IRS filing AND sending the copy of the 1099 to the contractors themselves (email AND paper copy). I highly recommend this method! It's well worth the small investment!
Regardless of which method you use, if you have a bookkeeper, they have most likely already been working on your 1099s or already been in communication with you about them. As long as you have been keeping up with categorizing your expenses and bookkeeping all year, e-filing should be pretty simple!
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Receiving 1099s as a Contractor
Receiving a 1099 & Using the W9
If you were paid as a contractor by any number of clients this year, you should expect to receive a 1099 from your clients. In order to help the process along, you can send your clients a completed W9 Form at any time after they've paid you. To facilitate this and make it as easy as possible on my clients, I have an automation set up in Honeybook to immediately send my W9 to my clients after they've made a payment. This way they have all my information on file to be able to process my 1099 during tax time.
But wait... what's a W9 form?
The W9 is a form showing your Taxpayer Identification information. It is simple and easy to fill out, containing your personal information and your TIN (Taxpayer Identification Number). Your TIN may be your Social Security Number (SSN) or it may be your EIN (Employer Identification Number).
Did you know? It is FREE to register your business with an EIN on the IRS website.
(Are you tired of acronyms yet? Good grief!)
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Does all this necessary business management make your head spin? If you need help maintaining your bookkeeping, organizing your files, or knowing how to categorize expenses, click here! We'd love to support you and are currently booking clients for Q1 of 2024.
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