Are they really a contractor?
Start here, because everything else depends on it. If you control how, when and where the work is done, the worker may be an employee, whatever the contract says. See independent contractor or employee.
See misclassification penalties and how to fix them.
What should you collect before paying?
A signed contract or engagement letter
Scope of work, rates, payment terms, ownership of work product and confidentiality.
Form W-9 from a US contractor
It gives you their legal name, tax classification and taxpayer number for the 1099. See Form W-9.
Form W-8BEN or W-8BEN-E from a foreign contractor
It documents foreign status, which is why no 1099 is filed for work done abroad. See paying foreign contractors.
Payment details
Bank account details confirmed directly with the contractor, not from an email that could be spoofed.
If you file electronically, you can check a US contractor's name and number against IRS records through the TIN matching program before year end.
If a contractor will not provide one, see backup withholding.
How should you pay them?
| Payment method | Who reports it |
|---|---|
| Bank transfer, ACH, wire or check | You, on Form 1099-NEC, if the year's total reaches $2,000 |
| Credit or debit card | The card processor, on Form 1099-K |
| Payment app for goods and services, such as PayPal or Stripe | The payment platform, on Form 1099-K |
| Freelance marketplace that pays the contractor | Usually the marketplace. Check its terms |
Keep each contractor's payments under one method where you can, so reporting is simple.
What should you record during the year?
- Record each payment against the contractor's name in your accounting software, not only under an expense category.
- Keep invoices with each payment.
- Separate reimbursed expenses from fees where the contract distinguishes them.
- Mark each contractor as needing a 1099 or not, with the reason.
Agencies working with many freelancers should also see bookkeeping for agencies.
How do you file at year end?
Run a report of payments by contractor
For January 1 to December 31, by payment method.
Identify who needs a 1099-NEC
US non-employees paid $2,000 or more in 2026 by bank transfer or check, other than most corporations. See Form 1099-NEC.
Chase missing W-9s now
If you cannot get a taxpayer number, you still file, and backup withholding may apply to future payments.
File with the IRS
Electronically if you have 10 or more information returns of all types, for example through the IRS Information Returns Intake System or filing software.
Send each contractor their copy
By February 1, 2027, by post or electronically if they have agreed to electronic delivery.
File with your state if required
Some states take copies through the IRS Combined Federal/State Filing Program, others require direct filing.
If you file on paper, see Form 1096.
What are the deadlines and penalties?
For 2026 payments, Form 1099-NEC is due to contractors and the IRS by February 1, 2027. Late or incorrect forms are penalized per form. See 1099 filing deadlines and penalties.
Are contractor payments deductible?
Yes, as ordinary and necessary business expenses, whether or not a 1099 is required. Keep the invoices and proof of payment. See deductible business expenses.
Want contractor payments and 1099s handled?
We onboard your contractors, track what you pay each one, and file their 1099-NEC forms with the IRS and your state each January.
Questions people ask
When do I need to file a 1099 for a contractor?
When you paid a US non-employee $2,000 or more for services during 2026 by bank transfer, check or cash, unless they are a corporation. File by February 1, 2027.
Do I file a 1099 if I paid a contractor through PayPal?
Generally no, if you paid through PayPal's goods and services option. The payment platform reports it on Form 1099-K.
Do I need a 1099 for a foreign contractor?
Not for a foreign person doing the work outside the US. Collect a Form W-8BEN to document their foreign status.
What if a contractor will not give me a W-9?
File the 1099 anyway with the information you have, and apply backup withholding of 24% to future payments if the number is still missing.
Sources
Every fee, date and rule on this page was taken from these official and primary sources.
- IRS: Instructions for Forms 1099-MISC and 1099-NEC
- IRS: Form W-9 and instructions (Rev. March 2024)
- IRS: Form W-8BEN
- IRS: Independent contractor (self-employed) or employee?
- IRS: Understanding your Form 1099-K
Rules and fees change. If you are reading this long after September 30, 2026, confirm the figures with the source before you rely on them.
Related guides
More in Payroll and contractors
This guide is general information. It is not tax or legal advice for your situation.