Do I need to send 1099 forms to my subcontractors?
Yes. If you paid a subcontractor $600 or more in a calendar year, you’re required to file a 1099-NEC reporting that payment. This applies to individuals, partnerships, and most LLCs. You send one copy to the subcontractor and file another with the IRS. The deadline for both is January 31 of the following year.
The form you need is the 1099-NEC, which stands for Nonemployee Compensation. This replaced the old 1099-MISC box 7 starting in 2020. If you see outdated advice about using a 1099-MISC for subcontractors, ignore it. The NEC is the correct form now.
The most important thing you can do is collect a W-9 from every subcontractor before you pay them. The W-9 gives you their legal name, business name, tax ID or Social Security number, and entity type. Without it, you can’t file a 1099 accurately. Chasing down W-9s in January when you’re trying to file is frustrating and avoidable. Make it part of your onboarding process. No W-9, no first check.
There’s one major exception that trips people up. Payments made by credit card, debit card, or through third-party processors like PayPal, Venmo (business), or Zelle (through a payment network) are not reported on a 1099-NEC. The payment processor handles the reporting on a 1099-K instead. So if you paid a sub $8,000 during the year but all of it went through a credit card, you don’t send them a 1099-NEC. If you paid $5,000 by check and $3,000 by credit card, you send a 1099-NEC for the $5,000.
You also don’t need to send a 1099 to corporations in most cases. If a subcontractor’s W-9 shows they’re an S-corp or C-corp, they’re generally exempt. The exceptions are attorneys and certain medical payments, but for construction and contractor work, corporations are typically off the hook.
Penalties for not filing are real. If you miss the January 31 deadline, the IRS charges $60 per form if you file within 30 days late. After that it goes up to $130, then $330 per form if you file after August 1 or not at all. Intentional disregard bumps it to $660 per form with no cap. For a GC working with 15 or 20 subs, those numbers add up fast.
Beyond penalties, there’s a practical reason to stay on top of this. If you don’t file 1099s, the IRS may disallow the deduction for those subcontractor payments on your business return. That means you could end up paying income tax on money you already paid out to someone else.
If your books are a mess and you’re not sure who you paid or how much, that’s a sign you need help getting organized before year end. A Long Beach bookkeeper who works with trades businesses can pull your records together, identify who needs a 1099, and make sure everything gets filed on time. The cost of getting it right is always less than the penalties for getting it wrong.
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More Questions
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Yes, if the education maintains or improves skills in your current trade, it's a deductible business expense. License renewals, code update courses, OSHA certifications, and manufacturer training all qualify. Education that qualifies you for a completely new profession does not.
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Keep income records, expense receipts, job-related documents, payroll files, subcontractor paperwork, and vehicle logs. Most records should be kept for at least three to seven years depending on the type.
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Yes, but you need to choose between the actual expense method and the standard mileage rate. Contractors with trucks often save more using actual expenses, though both methods require tracking your business miles.
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At minimum, review your profit and loss statement, balance sheet, accounts receivable aging, and job costing reports every month. These tell you whether you're actually making money, who owes you, and which jobs are profitable.
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