1099 Contractor

What is a 1099 contractor?

A 1099 contractor is an independent contractor who receives a Form 1099-NEC for payments of $600 or more during the year. Unlike employees, contractors control how they perform their work. You do not withhold taxes or provide benefits. The contractor is responsible for their own taxes, including self-employment tax. Properly classifying workers as employees or contractors is critical for compliance.

Worker classification rules

The IRS examines behavioral control, financial control, and relationship type. Contractors generally set their own hours, use their own tools, work for multiple clients, and have opportunity for profit or loss. Employees work under your direction, use your equipment, and rely on you for ongoing work. Misclassifying employees as contractors exposes you to back taxes, penalties, and potential lawsuits.

Managing contractor relationships

Collect a W-9 before making any payments. Issue 1099-NEC forms by January 31 for the prior year. Keep records of payments and contracts. Written agreements should clarify the independent contractor relationship. Do not treat contractors like employees by requiring set hours, providing training, or exercising excessive control. When in doubt about classification, consult your accountant or attorney.