Today, I wanted to talk about 1099 forms. Now, does just the mention of a 1099 form—or any tax forms—scare you a little? I totally get it. While I’m not a tax expert (and I want to make that clear from the beginning), I do want to give you some basic information about 1099 forms to help you determine whether you need to be filing them this month. First, let me say: it’s completely okay to feel intimidated by anything tax-related. It can be complicated, confusing, and constantly changing. This is a hurdle many people face—even I feel it sometimes, and I consider myself fairly financially savvy.
Before we dive in, just a quick reminder: the specifics I’ll be sharing in this are for the 2023 tax year. If you’re reading at a different time, most of the general information will still apply, but be sure to double-check things like dollar amounts and current requirements. If you’re using 1099 filing software, it should walk you through many of the details. I still wanted to mention that just in case.
Like many tax-related tasks, filing 1099 forms is really difficult if you haven’t done your bookkeeping for the year. These forms are for reporting payments made to your contractors. So, if anyone has worked for your business as a contractor and you’ve paid them over $600 in the year, that’s something you need to pay attention to. If you haven’t categorized your expenses or tracked how much you’ve paid different people, it’s going to be tough to get these forms filled out accurately.
The very first step is to get your bookkeeping caught up and cleaned up for the year.
If you need help with that, I’d love to support you. Just head over to my website at erikamillard.com to see the different ways I can help make that process simple, easy, and smooth, so you can start the new year fresh and ready to go.
As I mentioned earlier, a 1099 form is used to report payments made to contractors that total over $600 for the year. The IRS requires these forms because these individuals aren’t W-2 employees. They’re not officially on your payroll but the 1099 provides a more formal way to say, “Hey, I paid this person this amount of money.” It creates accountability in situations where payments are made to independent workers.
It’s important to be aware of the deadlines for filing, because missing them can result in penalties. The penalties vary depending on how late the forms are filed and how many you were required to submit. These forms are typically due by January 31st, meaning they must be either mailed out or e-filed by that date. Again, if you’re reading this in a different year, double-check the deadlines, as they may change.
How do you know if you need to file these forms or not?
This is where things can get a bit tedious and confusing. That’s why I always recommend double-checking with a tax professional to make sure you’re following the correct process for your business.
This is where things can get pretty tedious and confusing. It’s a good idea to double-check everything with a tax professional. If you’re working with one, they’ll help guide you. But you can also search online—there are some helpful decision trees on Google that walk you through the process. These visual tools can make it easier to understand whether or not you need to file a 1099 form for a particular person. As we mentioned, these forms apply to payments made to contractors totaling over $600 for the year. If the total is under $600, you currently don’t need to file.
The method of payment is where it gets a little more complicated.
Generally, you need to file a 1099 form if you paid the contractor in cash, by check, direct deposit, or bank transfer. For those using QuickBooks, this often applies because you’re typically paying from your business bank account directly to the contractor’s bank account. If that’s how you paid, and it meets the $600 threshold, then you’ll likely need to file a 1099 form.
However, if you paid using a credit card or a third-party payment processor like Stripe or PayPal, then you’re off the hook. The responsibility to file falls on the processor. These companies are now required to send their own version of the form to the contractor. That’s why it’s important to go person by person and review how you paid them. If the payment was made via credit card, Stripe, PayPal, or a similar platform, then you’re most likely not responsible for filing it yourself. But if you paid by cash, check, or bank transfer, you probably are.
And don’t forget—there are special rules when it comes to attorneys. If you paid an attorney a certain amount in fees, you may be required to send them a 1099 form as well. When in doubt, check with a tax professional or use a decision tree to guide you through the process.
So again, if your payments to an attorney for the year exceed that $600 threshold, you’ll want to send them a 1099 form as well. That’s a lot to take in, but my best advice is to go back through each of your contractors—and your attorney—and check if their payments meet or exceed $600. Then, consider how you paid them. Are you responsible for filing the form yourself or will the payment processor take care of it?
Good news—you can actually file the 1099 forms yourself.
Many clients don’t realize this and assume they have to pay a CPA to handle it, which can be costly. While a CPA’s expertise can be worth it if you have many contractors or complex situations, for most, filing on your own is straightforward.
Tools like QuickBooks can make this process much easier. QuickBooks not only lets you pay contractors but also helps you file the 1099 forms. When you set up a new vendor, you can check a box to “track for 1099.” At year-end, QuickBooks will generate a list of all your contractors, helping you quickly see who meets the filing threshold. This feature simplifies managing your 1099 obligations and reduces the chance of missing anyone.
If you use a different system or prefer not to file your 1099s through QuickBooks—since it does have some fees—you can create a dedicated contractor category in your accounting software. Make sure to assign all contractor payments to that category. This makes it easy to review your payments throughout the year and see if they add up to the $600 threshold.
If you prefer spreadsheets, you can add a separate tab to track every contractor payment. Record how much you paid and the payment method, especially if you plan to file the 1099 forms yourself. This approach keeps everything organized and saves you from digging through bank statements or transaction records at year-end.
One common question I get is, “What tools can I use to file the forms myself if I’m not using QuickBooks?”
While I find QuickBooks convenient because it combines paying contractors and filing forms with relatively reasonable fees, there are other options. For example, 1099Online.com lets you enter your vendor’s details, payment amounts, and other necessary information, then files the forms for you. These tools handle all the data entry for the forms. That way you don’t have to manually input everything which can save you a lot of time and hassle.
When filing 1099s, you’ll need details like the contractor’s address and EIN number. But you don’t have to write all of that by hand.
A word of caution—some clients try to print paper 1099 forms themselves to avoid e-filing fees.
The problem is, the IRS requires you to use special paper forms that can’t just be printed on a regular home or office printer. These forms usually come in packs of 10 or 20. If you only need a few, it ends up being more expensive and complicated than just e-filing.
That’s why I usually recommend e-filing instead. Most e-filing services charge a fee but will handle mailing the 1099s to your contractors and file the reports electronically with the IRS for you. This saves you time, hassle, and the risk of making mistakes by doing it manually.
I do want to warn you against trying to handle the paper 1099 forms manually yourself because, like I mentioned, it can get expensive really fast.
To summarize, in this blog we covered:
- What a 1099 form is
- When it’s due
- Whether you can file it yourself
- What tools you can use
I hope all those questions were answered for you. If you need help with a specific situation, feel free to reach out. I always recommend checking with a tax expert if you have one—especially for those detailed, nitty-gritty questions.
My goal here was to give you a solid overview so you have the general knowledge to know if you need to file these forms or not. And, yes, this was packed with 1099 jargon—but I think we’ve covered it well!
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