Most contractors will work with a subcontractor (or multiple subcontractors) from time to time. In many cases, that means you’ll need to file a 1099-NEC (non-employee compensation) form with the IRS.
If you have employees, you already have some experience generating and filing tax forms. However, filing a 1099 is different from filing a W-2. In this blog, we’ll take an in-depth look at how to file 1099 tax forms for subcontractors.
If you need help filing, Devine Consulting LLC is here for you. Get in touch today for your free accounting health check!
When Do You Need to File a 1099 for Subcontractors?
Generally, if your business is paying someone who is not an employee more than a specific threshold, you must file a 1099-NEC form. There’s a so-called “four-part rule” to help you determine whether you have to file a 1099 or not. You typically have to file a 1099-NEC if all four of these conditions are met:
1. The Worker in Question Is Not an Employee
If you reported the payments to a worker on a W-2 form, that worker is an employee. You only need to issue a 1099 for payments made to someone who is not an employee.
2. You Paid the Worker $600 or More (or $2,000 or More Starting January 1, 2026)
Until the end of the 2025 calendar year, if you paid someone $600 or more, you had to create a 1099. However, the One Big Beautiful Bill Act (OBBBA), which was passed in 2025, significantly raised this long-standing threshold to $2,000.
This means that for the 2025 tax year, you must file a 1099 if you pay a subcontractor $600 or more. For the 2026 tax year and beyond, you have to file a 1099 if you pay a subcontractor $2,000 or more.
3. The Payment Was Made in the Course of Business
You only need to send a 1099 if the payment you made was from your business and for a business-related reason. For example, if you personally pay someone $600 to mow your lawn over the course of the year, you do not need to file a 1099.
4. The Payment Was Made to an Individual, Partnership, or Estate
You typically only need to file a 1099-NEC if the business payment in question was made to an individual, a partnership, or an estate. In rare cases, you may need to file a 1099 for making a payment to an LLC. However, payments to corporations (including S-corporations and C-corporations) generally don’t require you to file 1099s.
If you’re not sure whether a payment you made to an LLC or corporation is an exception to the rule, get in touch with us.
Important Deadlines for Filing 1099 Forms for Subcontractors on Time
When you’re generating 1099-NEC forms, there are two important deadlines to remember:
- The deadline to file the tax form with the IRS
- The deadline to send the tax form to the contractor
Fortunately, these two deadlines fall on the same day. This is typically January 31 of the following tax year. However, if January 31 falls on a weekend or holiday, the deadline is automatically extended to the next business day.
This happened in 2026. Ordinarily, a business issuing 1099-NEC forms to subcontractors for the tax year 2025 would have until January 31, 2026, to do so. However, because January 31 fell on a Saturday, the deadline was moved to February 2, 2026.
Steps to Take Before Filing Your 1099 Form
Before you start filing your 1099 forms, take these steps to ensure you have all the required information:
Collect Each Contractor’s W-9 Form
IRS Form W-9, Request for Taxpayer Identification Number and Certification, is a one-page form that includes basic information about each contractor. Your business should have asked each contractor to fill one out at the time of hiring.
W-9 forms include information you’ll need to create 1099-NEC forms:
- The contractor’s name and address
- Their taxpayer identification number (TIN)
- Their tax classification (individual/sole proprietor, LLC, etc.)
The IRS website has downloadable, fillable W-9 forms you can use.
Know the Total Amount You Paid Each Contractor
When filling out your 1099 forms, you don’t need to break down how much you paid the contractor per month, per job, or per hour. You just need the total amount you paid.
For many business owners, keeping track of this information can be a challenge. You might consider outsourcing your bookkeeping to ensure accurate accounting.
Businesses almost never withhold state or federal taxes from their contractors. If your business is withholding, you’ll need that tax information, too.
Collect Your Business Information
You’ll also need basic information (including name, address, and TIN) for your business.
Filling Out Form 1099-NEC
Form 1099-NEC is relatively straightforward to fill out. Here’s what it looks like:
You can fill out 1099 templates using the information you gathered above. However, if you have payroll software, you can save time by automatically generating forms based on system data.
How to File 1099 for Subcontractors When Sending Forms to the IRS
Once you’ve generated the forms you need, it’s time to send them to the IRS. There are two ways to do this:
- E-filing
- Printing and mailing
If you have to file 10 or more 1099-NEC forms (or other information returns), the IRS requires you to e-file. You can print and mail the forms if you have fewer than 10, but the IRS still strongly encourages e-filing.
Fortunately, the IRS makes e-filing 1099-NECs and other information returns easy and free. Visit the Information Returns Intake System (IRIS) Taxpayer Portal to do so.
Sending Tax Forms to Subcontractors
Your subcontractors will need their 1099-NECs to file their own tax returns. Don’t forget that the deadline to send the forms to subcontractors is the same as the deadline to file with the IRS. There are a few different ways you can do so:
- Mailing the form to the contractor’s address
- Sending the form electronically
- Using third-party software to mail forms and send them electronically
If you want to send 1099 forms electronically, you must have the contractor’s consent to do so in writing. You must also make sure the filing form remains accessible through October 15.
Penalties for Failing to File 1099 Forms
Failing to file 1099-NEC forms when required comes with financial penalties. These penalties increase with time. Here are the penalties for 1099-NEC and other information returns due in 2026:
- Up to 30 Days Late: $60 per form
- 31 Days Late to August 1: $130 per form
- Filed After August 1 or Not at All: $340 per form
- Intentional Disregard: $680 per form
If you fail to file a 1099-NEC because you were confused or made a mistake, you’ll probably incur the lower penalty. However, if you knowingly fail to file your 1099 forms, the IRS will charge you the higher rate for intentional disregard.
If you have many subcontractors, failing to file your 1099s can get very expensive quickly. The IRS does have a penalty cap, but the cap is different for small and large businesses. However, there is no cap on penalties for intentional disregard.
Why Should You Outsource to an Accounting Partner?
Some business owners opt to create 1099-NEC forms and file them by themselves. However, it’s worth considering working with an accounting partner. When you outsource your 1099 creation and filing to an accounting firm, you get the benefit of an in-house accounting team without the overhead.
Not convinced? Here are a few reasons to consider outsourcing:
You Reduce the Risk of Costly Penalties
Your business could face steep financial penalties if you don’t file 1099s or if you file them incorrectly. But that’s not the only penalty risk. If you accidentally (or intentionally) misclassify W-2 employees as 1099 contractors, you’ll face major penalties and increased scrutiny from the IRS.
Accounting Partners Have Access to TIN Matching Services
Accounting partners have access to tools of the trade that can make tax filing much easier. One of these tools is taxpayer identification number (TIN) matching. When you outsource your 1099 prep to us, we can verify that the TINs on your 1099s match those of existing taxpayers.
It might seem like a small step, but TIN matching can help you avoid having your forms rejected (and the complications that can come with that).
You’ll Save Time and Money
Working with an accounting partner is about more than just creating your tax forms and filing your taxes. It’s also about being proactive throughout the year. When you partner with us, we’ll handle bookkeeping and gather W-9 forms in advance. You won’t have to scramble at the last minute, and you’ll be free to focus on running your company.
Looking for Help Preparing and Filing Tax Forms?
When you already have a business to run, setting aside time to navigate tax requirements is a challenge. At Devine Consulting, we partner with small business owners, such as those in the construction, engineering, and real estate industries, to handle bookkeeping, reporting, financial planning, and more.
If you want to learn more about how we can help you file your 1099 forms, call us or get in touch online today!