Tax season can feel like a nonstop hustle—especially when you're juggling multiple gigs, running a small business, or working as an independent contractor. Between keeping clients happy, meeting deadlines, and navigating tax forms, it’s a lot to manage. And if you've heard the term “1099” thrown around but aren’t exactly sure what it means or why it matters, you’re definitely not alone.
If you're issuing 1099s to subcontractors or receiving one yourself, understanding how they work is key to keeping your business tax-compliant. Let’s walk through the different types of 1099 forms, who needs them, and how to file them without the hassle.
Understanding 1099 Forms for Small Business Owners
If you’re running a small business or working as an independent contractor, you’ll likely come across a 1099 form. In simple terms, it’s how the IRS tracks income that doesn’t come from a traditional paycheck. While employees receive a W-2, freelancers, gig workers, and contractors get a 1099 to report their earnings.
The most common version is the 1099-NEC (Nonemployee Compensation), which covers payments for freelance or contract work. But there are other types too—some report rent payments, legal settlements, or interest earned from bank accounts.
When Do You Need a 1099 Form?
Not every dollar earned or paid requires a 1099. There are specific rules about when these forms come into play. The IRS has a general rule: if you pay or receive at least $600 in a given year for certain types of transactions, a 1099 form is required. This means:
- If you hire an independent contractor and pay them $600 or more, you must issue them a 1099-NEC (Nonemployee Compensation).
- If you work as a freelancer, gig worker, or contractor and earn $600 or more from a single client, they should send you a 1099-NEC so you can report that income on your tax return.
- If you earn miscellaneous income, such as prize winnings or legal settlements over $600, you may receive a different type of 1099.
But 1099s aren’t just for contract work. There are 1099 forms for all sorts of transactions, including:
- Interest income (1099-INT)
If you earn interest from a savings account, your bank may send you this form. - Real estate proceeds (1099-S)
If you sell property, you may receive this form detailing the sale. - Debt cancellation (1099-C)
If a lender forgives or cancels a debt of $600 or more, you may receive this form because the IRS considers that amount taxable income.
The Most Common 1099 for Small Businesses
For most small businesses and freelancers, the 1099-NEC is the form that matters most. This form is specifically used to report payments made to nonemployees aka freelancers, contractors, or anyone who isn’t on your payroll.
So, if your business hires a graphic designer, virtual assistant, or marketing consultant and pays them at least $600 over the course of the year, you’re responsible for issuing them a 1099-NEC by the IRS deadline. Likewise, if you’re a freelancer who made at least $600 from a client, you should expect to receive this form.
At the end of the day, 1099 forms exist to ensure income is properly reported and taxed. Whether you’re paying others or receiving payments yourself, understanding how these forms work can help you avoid tax headaches and stay on top of your finances.
Understanding Tax Differences Between Employees and Gig Workers
When bringing people on board to help with your small business, it’s crucial to know the difference between an employee and an independent contractor, especially when tax time rolls around. These two worker classifications come with very different tax obligations, and misclassifying someone can lead to penalties from the IRS.
Employees: Taxes Are Withheld
If you hire an employee, you’re responsible for withholding taxes from their paycheck. This includes:
- Federal and state income taxes
- Social Security and Medicare taxes (FICA)
- Unemployment taxes (FUTA)
At the end of the year, you’ll provide them with a W-2 form, which reports their total earnings and the taxes withheld. The IRS and the employee both receive a copy.
Example: You hire a full-time office manager for $70,000 a year. For each paycheck, you deduct the required taxes and send them to the IRS. When tax season arrives, you issue them a W-2, which they use to file their taxes.
Independent Contractors: No Tax Withholding
If you hire a freelancer, gig worker, or independent contractor, things work differently. You don’t withhold any taxes from their payments. Instead, they are responsible for handling their own income taxes, including self-employment tax, which should be paid quarterly.
If you pay a contractor $600 or more in a year, you must issue them a 1099-NEC form, which reports how much you paid them. However, unlike employees, they won’t see any tax deductions on their earnings until they file their own taxes.
Example: You hire a freelance graphic designer for various projects and pay them $16,000 over the year. You don’t deduct any taxes from their payments. Instead, you issue them a 1099-NEC, and they take care of their own tax obligations.
Why This Matters
Misclassifying a worker—whether intentionally or by mistake—can lead to IRS fines, back taxes, and other penalties. If you’re unsure if someone is an employee or a contractor, consider how much control you have over their work. Generally, if you set their hours, provide training, and oversee their daily tasks, they’re likely an employee. If they work on their own schedule and use their own tools, they’re probably an independent contractor.
Be prepared during tax season. Apply for a cash advance and gain access to funds to help you handle taxes and other financial hurdles that come your way!
Common 1099 Forms Small Businesses Deal With
Did you know there are more than 20 types of 1099 forms? The good news is, that you probably won’t need to deal with most of them. For small business owners and independent contractors, only a few usually apply. The 1099-NEC is the most common, but depending on how you earn or spend money, you might also receive or send other versions that report different types of income.
Here’s a breakdown of the five most common 1099 forms you might need to send or receive.
1. 1099-NEC (Nonemployee Compensation)
This is the go-to form for independent contractors and freelancers. As explained earlier, if you hire someone for contract work and pay them $600 or more in a year, you must issue a 1099-NEC to report their earnings. Meanwhile, if you’re an independent contractor, expect to receive this form from any client who paid you that amount.
Example: You hire a freelance writer for your business and pay them $2,000 throughout the year. You’ll need to send them a 1099-NEC so they can report their income.
2. 1099-MISC (Miscellaneous Income)
Think of this form as the catch-all for various types of business-related payments. It’s commonly used for:
- Rent payments
- Legal fees (like payments to an attorney)
- Prizes and awards
If your business makes any of these payments and meets the current threshold, which is at least $600, you may need to issue a 1099-MISC.
Example: Your small business rents an office space and pays your landlord $12,000 a year. You might need to issue them a 1099-MISC.
3. 1099-K (Third-Party Transactions)
If you process payments through platforms like PayPal or Venmo or get paid directly via credit, debit, or gift card, you might receive a 1099-K. This form reports payments processed through third-party networks and credit card transactions. The IRS plans to lower the reporting threshold to $2,500 for 2025 and $600 for 2026, meaning more small business owners and gig workers will start receiving this form.
Example: You sell handmade jewelry online and receive $10,000 in payments through PayPal. You’ll likely get a 1099-K from PayPal showing your earnings.
4. 1099-INT (Interest Income)
If your business earns more than $10 in interest from a bank account, savings account, or other investments, you’ll receive a 1099-INT. Even though $10 might not seem like much, the IRS still expects you to report it.
Example: Your business keeps funds in a high-yield savings account and earns $75 in interest over the year. Your bank will send you a 1099-INT to report that income.
5. 1099-DIV (Dividend Income)
If your business owns stocks or mutual funds and receives more than $10 in dividends, you’ll get a 1099-DIV. This form reports dividend payments, which are taxable income.
Example: Your business invests in dividend-paying stocks and earns $500 in dividends. The brokerage firm will send you a 1099-DIV to report it.
Which 1099 Forms Apply to Your Business?
The specific 1099 forms you send or receive depending on how you earn and spend money. If you hire independent contractors, process payments through third-party platforms, or earn interest or dividends, you’ll likely deal with one or more of these forms. Keeping track of payments throughout the year will make tax season much easier, so you’re not scrambling to figure out who gets what form at the last minute.
When Are You Required to Send a 1099-NEC?
As a small business owner, knowing when to send a 1099-NEC is key to staying compliant with tax laws. This form serves two important purposes:
- It reports payments made to independent contractors to the IRS.
- It helps your contractors or freelancers properly file their taxes.
If you work with employees, you won’t need to send them a 1099-NEC—instead, they’ll receive a W-2 form, which includes withheld payroll taxes. But if you hire freelancers, gig workers, or independent contractors, you may be required to issue them a 1099-NEC under specific circumstances.
Check Your State Rules About 1099 Reporting
Remote work and online platforms have made hiring freelancers across different states easier than ever. However, 1099 reporting rules vary by state, which can add complexity to the filing process. Here are some key factors to keep in mind:
1. State-Specific 1099 Forms
While the IRS handles federal tax reporting, some states require additional reporting. Certain states even have their own 1099 forms that businesses must submit separately.
2. State Taxpayer Identification Numbers (TINs)
Some states require independent contractors to have a state-specific Taxpayer Identification Number (TIN). To avoid errors, employers should confirm this information before issuing a 1099-NEC.
3. State Tax Withholding for Independent Contractors
In some states, businesses must withhold state income tax from payments to independent contractors and report those amounts on state 1099 forms. This isn’t required in every state, so check local tax laws to ensure compliance.
4. State-Specific Filing Deadlines and Requirements
Federal 1099-NEC forms are due by January 31, but some states have different deadlines for reporting 1099 payments. Missing these deadlines could result in penalties.
5. State-Specific Penalties for Noncompliance
Failing to report 1099-NEC payments correctly can lead to fines and interest charges at both the federal and state levels. Each state has its own rules, and noncompliance could result in costly mistakes.
The IRS Combined Federal/State Filing Program (CF/SF)
To make things easier, the IRS offers the Combined Federal/State Filing Program (CF/SF), which allows businesses to submit certain 1099 forms once at the federal level, and the IRS will forward them to participating states.
However, not all states participate, and the 1099-NEC is often excluded from this program. This means you might still need to file directly with your state tax agency. If you hire freelancers in multiple states, double-check each state’s specific 1099 rules to ensure compliance.
Where to Find 1099 Forms for Your Business
If you need to issue 1099 forms, you’ll have to get the right documents before tax season rolls around. While you can easily find informational copies online, official 1099 forms must be ordered or obtained from specific sources.
Getting 1099 Forms: Where to Look
- IRS Website
You can view blank informational copies of 1099 forms, including the 1099-NEC, on the IRS website. However, these versions cannot be printed and filed directly. The official scannable forms must be ordered from the IRS or an approved vendor. - IRS Ordering Service
You can request pre-printed 1099 forms directly from the IRS at IRS.gov. It’s free, but processing and delivery may take several weeks, so make sure to plan ahead. - Office Supply Stores
Many major retailers, such as Staples, Office Depot, and OfficeSupply.com sell 1099 form kits that include the necessary copies for filing with the IRS and sending to contractors. - Tax Preparation or Accounting Software
If you use software like QuickBooks and TurboTax, you can generate and electronically file 1099 forms directly from the platform, making the process faster and easier. - Online Filing Services
Third-party services like Tax1099.com or eFile4Biz allow you to complete, file, and send 1099 forms electronically without needing physical copies.
Before You File: Gather W-9 Forms from Contractors
Before you prepare and send out 1099 forms, make sure you have a W-9 form, which is the equivalent of the W-4 form for employees, on file for each contractor. A W-9 contains the contractor's name, address, Social Security Number (SSN), or Taxpayer Identification Number (TIN) so you can correctly report payments.
Pro Tip: Request W-9 forms as soon as you hire a freelancer or independent contractor. This prevents delays and ensures you have the right information when tax season arrives.
1099 Filing Rules Every Small Business Should Know
Filing 1099 forms might sound a bit intimidating at first, but once you understand the basics, it’s a straightforward process. If you're working with independent contractors, vendors, or other nonemployees, you’ll want to make sure you’re sending out the right forms—at the right time—to stay compliant with IRS rules and avoid penalties.
Each 1099 form comes with multiple copies, and each copy has its own destination.
- Copy A
This goes directly to the IRS. Think of it as the official record they’ll use to match up income for tax purposes. - Copy 1
If your state requires it, this version goes to the state tax department. Not every state asks for it, so it’s worth double-checking. - Copy B and Copy 2
These go to your contractor, freelancer, or vendor—whoever you paid. They’ll use these to report their income when they file their taxes. - Copy C
This one stays with you for your business records. You’ll want to hang onto it just in case there’s ever a question later on.
Important 1099 Filing Deadlines
Deadlines matter if you're filing one or fifty forms. Here’s a quick cheat sheet to keep you on track:
| Form Type | Recipient Deadline | Paper Filing Deadline (IRS) | Electronic Filing Deadline (IRS) |
| 1099-NEC | January 31 | January 31 | January 31 |
| 1099-MISC | January 31 | Febuary 28 | March 31 |
| 1099-DIV | January 31 | Febuary 28 | March 31 |
| 1099-INT | January 31 | Febuary 28 | March 31 |
| 1099-K | January 31 | Febuary 28 | March 31 |
| 1099-SB | Febuary 15 | March 1 | March 31 |
| 1099-S | Febuary 15 | Febuary 28 | March 31 |
| 1099-LS | Febuary 15 | Febuary 28 | March 31 |
| 1099-B | Febuary 15 | Febuary 28 | March 31 |
| All other 1099 Forms | January 31 | Febuary 28 | March 31 |
Smart 1099 Filing Tips to Keep Your Small Business on Track
1099 form filing might not be the most exciting part of running your business, but it’s a process you shouldn't take lightly. With a few smart habits and a bit of prep, you can make tax season way less stressful, and your contractors will appreciate how on top of things you are.
Prep Early: Don’t Wait Until January
Start collecting the info you’ll need before you actually pay anyone. Whenever you hire a freelancer, vendor, or independent contractor, ask them to fill out a W-9 form right away. This lets you have everything you need to complete the 1099 later on.
Use the Right Form
Not all 1099s are the same! For independent contractors, you’ll most likely use Form 1099-NEC. But if you’re reporting things like rent, prizes, or legal fees, you might need Form 1099-MISC. It’s a good idea to double-check which one applies before filing.
Keep Your Records for 3+ Years
Once you file, don’t toss the paperwork. Keep copies of every 1099 form you submit, plus any W-9s, payment records, or invoices. These can be a lifesaver if there’s ever a question from the IRS—or if you just need to look something up down the road.
Use Software or Get Help
Leveraging accounting software can streamline the filing process. These tools often let you e-file directly and keep track of who you’ve paid throughout the year. If your situation feels a bit more complex, don’t hesitate to check in with a tax professional. It’s better to ask questions now than deal with problems later.
What Happens If You Miss the 1099 Deadline or Make a Mistake?
Getting it wrong or submitting it late can cost you more than just time. The IRS isn’t shy about handing out penalties, and those fines can add up fast. Here's what could happen if you file late or make errors, and what you can do to steer clear of those issues.
Penalties for Late Filing
If you don’t file your 1099 forms by the deadline, the IRS can charge you a penalty per form. So if you’re working with multiple contractors and miss the deadline across the board, those costs could pile up quicker than you think.
Here’s what the IRS might charge:
| How Late You File | Penalty Per Form |
| Up to 30 days late | $60 |
| 31+ days late (but before August 2) | $130 |
| Filed after August 1 or not filed at all | $330 |
| Intentional disregard of filing requirements | $660 |
Let’s say you’re 40 days late and have 5 contractors to report. That’s $130 x 5 = $650 in penalties.
What Counts as an Error?
In addition to being on time, you also need to get the details right. Even small mistakes like misspelling a name or entering the wrong amount could lead to extra work, correction forms, or worse—more penalties.
Here are common errors to watch out for:
- Incorrect or missing Taxpayer Identification Numbers (TINs)
- Wrong payment amounts
- Using the incorrect year for the forms
- Using the wrong 1099 form (like submitting a 1099-MISC instead of a 1099-NEC)
- Not using the approved forms
Also, if you realize you made a mistake after submitting it, don’t panic. You can usually file a corrected form. The key is to catch the error quickly and fix it before it causes bigger issues.
How to Fix Mistakes on Your 1099 Forms
Mistakes on 1099 forms are more common than you might think—but they’re usually easy to fix. If you’ve already submitted the form to the IRS, you’ll need to send a corrected version. If you haven’t filed it yet, you can simply void the incorrect form and start over.
To make a correction, fill out a new 1099 and check the “Corrected” box at the top. Enter the updated information, then send the corrected form to both the recipient and the IRS. Be sure to keep copies of both the original and corrected forms for your records, just in case. It’s all about making sure everything’s accurate and up-to-date.
Time to Take Control of Tax Season
Running a small business comes with many responsibilities, and keeping up with tax forms like the 1099 is a big one. Staying on top of your filing deadlines, choosing the right forms, and avoiding mistakes can save you from costly penalties and a lot of stress. At the end of the day, the key is to be organized, start early, and ask for help when you need it.
And if you need help financially to cover costs during this busy season, Giggle Finance has your back.
We know tax season can be overwhelming, especially when you’re juggling everything else that comes with running a small business. That’s why Giggle Finance offers fast, flexible funding options that give you room to breathe when you need to consult tax professionals, invest in software to simplify your filings or cover short-term expenses while waiting on client payments.
Here’s how Giggle Finance can support you during tax season:
- Quick access to funding when you need it most—no credit requirements or long waits
- Simple application process that takes just minutes online
- Flexible repayment options built to fit around your cash flow
- No hidden fees or surprises—just transparent terms
- Funding of up to $10,000 for new applications and up to $20,000 upon renewal.
Tax season doesn’t have to be a headache. With Giggle Finance in your corner, you’ve got one less thing to worry about—and a little more breathing room to focus on growing your business.
Apply now to have access to cash whenever you need it the most.
Frequently Asked Questions
Do You Need to Send a 1099-NEC to Sole Proprietors and Partnerships?
Sole proprietors and partnerships are two business types that definitely fall into the 1099 category. Even though they aren’t big companies, the IRS still wants to know about those payments.
So, if you hired a freelance graphic designer who runs their own sole proprietorship, or worked with a small partnership for marketing help, a 1099-NEC needs to be sent their way. The only time you wouldn’t need to send a 1099-NEC is if the vendor is a corporation (except in some specific cases, like attorney fees).
Are S Corporations and C Corporations Required to Receive a 1099?
In most cases, S corporations and C corporations don’t need to receive a Form 1099. The IRS generally exempts corporations from 1099 reporting requirements, so if you’re working with a vendor or contractor registered as an S corp or C corp, you can skip the 1099-NEC.
That said, there are exceptions. For example, if you’ve paid an attorney—even if they operate as a corporation—you still need to send a 1099 for certain services. Medical and healthcare payments also fall under this exception.
So, always double-check how your vendors are structured, and when in doubt, ask them to fill out a W-9 form. That’ll help you figure out if they’re a corporation or something else, like a sole proprietor or partnership (which do require 1099s).
Do I Send a 1099-NEC to an LLC?
It depends on how that LLC is taxed. Some are taxed like individuals, while others are taxed like corporations. And that difference determines if you do have to issue a 1099-NEC to an LLC or not.
- If your contractor runs a single-member LLC, they’re treated as a “disregarded entity.” That means the IRS sees their business income as part of their personal income. In this case, you should send them a 1099-NEC if you paid them $600 or more for services during the year.
- If your contractor's LLC is taxed as a corporation—either an S corp or a C corp—you usually don’t have to send a 1099-NEC. Corporations are generally exempt from receiving these forms.
However, even some corporations (including LLCs taxed as corporations) must still get a 1099 in special situations. For example, legal services and medical-related payments often require 1099 reporting regardless of business structure. So, if you’re paying an attorney, medical provider, or someone in a similar profession, you might still be on the hook for filing a 1099.
That's why you should always ask your contractors to fill out a W-9 form before you start working together to easily get the answer to questions like “Do you need to send a 1099-NEC to an LLC?” or “What companies get a 1099 form?”. That form will tell you exactly how their business is set up for tax purposes—and make your life much easier come January. And when in doubt, check in with your accountant or tax advisor. They’ll help you stay compliant without adding unnecessary stress to your plate.
What if You Get Both a W-2 and a 1099-NEC?
So, you’ve got both a Form W-2 and a 1099-NEC in your mailbox—now what?
The IRS looks at both forms when calculating your taxes. That means:
- Your W-2 income is taxed in the usual way—your employer already took care of withholding taxes like Social Security and Medicare.
- Your 1099-NEC income is a little different. Since no taxes were taken out, you’re responsible for paying them yourself. That includes federal income tax and self-employment tax.
You’ll report all of this when you file your return, with W-2 income on one part and 1099-NEC income on another. Depending on your situation, you might also be able to deduct certain expenses related to your freelance or contract work, which can help lower your tax bill. Getting both forms just means you had multiple income streams—and that’s something to be proud of. Just be sure to report everything accurately and keep those records handy.
What to Do If You Receive Both a 1099-NEC and a 1099-K
If you’ve received both a 1099-NEC and a 1099-K, you might wonder what that means—and, more importantly, what you’re supposed to do with them. These two forms are different, but the same payment can end up being reported on both forms in some cases.
The IRS knows this kind of overlap can happen, but they’ll still expect your total reported income to match what they see from the forms. That’s why it’s important to keep accurate records of how much money you actually made, who paid you, and how those payments came through.
Here are a few helpful tips to keep you on track:
- Compare the forms with your own records. If you see the same income listed twice, don’t report it twice.
- Save all invoices, bank deposits, and receipts. These help you prove what you actually earned in case there’s ever a mix-up.
- If things still feel murky, don’t hesitate to talk to a tax pro, especially if you work with many different clients or use multiple payment apps.
What to Do If Your 1099-NEC Is Late or Missing
If you don't receive your 1099-NEC on time, don’t panic. It's important to report all the income you earn, even if the form hasn’t arrived.
Suppose you were expecting a 1099-NEC from a business or client but haven’t received it. In that case, you must still report the nonemployee compensation on your tax return. Start by reaching out to the company or individual who should have sent you the form. Sometimes, a simple reminder can prompt them to send it right away.
But when do companies have to send 1099 form? If you still haven’t received your missing 1099 form by the end of February, you can call the IRS directly at 800-829-1040 for help resolving the situation.
When you call, make sure you’ve got the following info ready:
- Your full name, address, phone number, and Social Security number
- The dates you worked or received payments
- The employer’s or payer’s name, address, and phone number
Once you give the IRS those details, they’ll reach out to the employer or payer on your behalf and request that they send you the missing form.
What Situations Don’t Require 1099 Forms
Not every payment you make requires a 1099 form. In fact, if the payment isn’t tied to business income or profit-making activities, you’re probably off the hook.
For example, if you hire a cleaner to tidy up your home, you don’t need to send them a 1099. But if that same cleaner works on your rental property or office space, that’s a business expense, and a 1099 might be required.
The IRS also gives a few more clear-cut examples of when you can skip the paperwork:
- Payments to corporations, including LLCs treated as S corps
- Rent that’s paid directly to a property manager, not the landlord
- Services like freight, phone, or storage
- Payments to tax-exempt organizations
- Non-wage payments to employees that are reportable on Form W-2
The 1099-NEC is for reporting payments related to your business, especially those made to freelancers, independent contractors, or vendors. If the payment is not tied to business income, you're likely in the clear.
Disclaimer: Giggle Finance provides Revenue-Based Financing programs for business purposes only. Any mention of any loan product(s), consumer product(s), or other forms of financing is solely for marketing and educational content purposes and to help distinguish Giggle Finance’s product from other comparable financing options available in the market.