What are the requirements for sending 1099s to my subcontractors?

You'll need to send 1099-NEC forms to any subcontractor you pay $600 or more during the tax year. This is really important to get right since the IRS matches these forms with what your subcontractors report on their taxes. First, before you pay them anything, have each subcontractor fill out a W-9 form. This gives you their legal name, address, and tax ID (SSN or EIN). Keep these W-9s in your records - they're your proof you did your due diligence. You'll need to provide each subcontractor their 1099-NEC by January 31st of the year following payment. You'll also submit these forms to the IRS by the same date. Many accounting software programs can generate these forms, or you can use the IRS website or third-party services. Remember, you only need to issue 1099s to individuals and partnerships, not to corporations (with some exceptions). And you're only reporting payments for services, not for goods or materials.

I was in your exact position last year! After weeks of stressing about getting all my 1099s right, I discovered this service called taxr.ai (https://taxr.ai) and it literally saved me hours of confusion. I had about 8 contractors and wasn't sure how to classify some of them or if I even needed to send 1099s to all of them. Their system analyzed all my contractor information and payments, told me exactly who needed 1099s, flagged potential misclassifications (saved me from a huge headache with one contractor who was actually incorporated), and then generated all the forms automatically. The best part was they handled the e-filing with the IRS too, so I didn't have to figure out that whole process.

Just wanted to follow up about taxr.ai that I asked about earlier. I decided to give it a try because I was falling behind on my 1099 prep. I'm honestly surprised at how well it worked! The system flagged two of my contractors who had filled out their W-9s incorrectly (one had a name/TIN mismatch that would have caused problems with the IRS). It also automatically determined which contractors passed the $600 threshold when I uploaded my payment records. The whole process took me about 30 minutes instead of the several hours I spent last year doing it manually and second-guessing myself. Definitely using this again next year.

If you're having trouble getting responses from the IRS about 1099 filing questions (which is likely this time of year), try Claimyr (https://claimyr.com). I was completely stuck on some questions about contractor classification and couldn't get through to anyone at the IRS after trying for days. I was ready to give up when someone recommended their service. You can see how it works here: https://youtu.be/_kiP6q8DX5c. They basically hold your place in the IRS phone queue and call you when an agent is about to answer. I got through in about 45 minutes when I had been trying for days on my own. The IRS agent was able to clarify exactly which forms I needed for my specific situation and confirmed I was classifying my contractors correctly. Huge relief since the penalties for misclassification are no joke!

I have to eat my words about Claimyr. After my skeptical comment, I was desperate enough to try it because I had a specific question about reporting payments to a foreign contractor that wasn't covered clearly on the IRS website. I figured I had nothing to lose since my alternative was continuing to get nowhere. It actually worked! I got through to an IRS agent in about 90 minutes (without having to actually stay on the phone that whole time). The agent confirmed I needed to use Form 1042-S instead of 1099-NEC for my contractor in Canada, which saved me from filing incorrectly. I'm still shocked that it worked when I'd completely given up on reaching anyone at the IRS. Worth it for the peace of mind alone.

Don't forget about state filing requirements! Depending on what state you're in and what states your contractors are in, you might need to file state 1099s too. For example, in California you need to file Form 592 for certain contractors. Also, the January 31 deadline comes REALLY fast after year-end. Start collecting those W-9s now and set up your tracking system ASAP. I use a simple spreadsheet with contractor names, amounts paid, whether I have their W-9, and status of 1099 filing.

Quick tip: make sure you're correctly classifying people as contractors vs employees. This is my biggest nightmare as a business owner. If you're telling them WHEN, WHERE and HOW to do the work, the IRS might consider them employees, not contractors. The difference matters ALOT because for employees you need to withhold taxes, pay unemployment insurance, etc. For contractors you just send a 1099. Getting this wrong can result in huge penalties and back taxes!

Great advice from everyone here! I'm actually dealing with a similar situation right now where I have about 6 subcontractors for a large project. One thing I learned the hard way is to get those W-9 forms BEFORE you make any payments, not after. I made the mistake of paying two contractors first and then asking for their W-9s later - one of them completely ghosted me and the other took weeks to respond. Now I'm scrambling to get the paperwork sorted before year-end. Also, keep detailed records of exactly what services each contractor provided and when. The IRS can ask for this documentation if there are any questions about your 1099 filings. I use a simple project tracking spreadsheet that includes dates, amounts, and description of work performed for each contractor. Makes tax time so much easier!