For years you were the one waiting on a form. You refreshed your inbox in late January, hoping the client's 1099 would show up and match your records. Then you hired a part-time editor, or a virtual assistant, or a developer to fix your website. Now you are the client. The paperwork you used to complain about is, quietly, yours to produce.

Most freelancers don't notice the moment this flips. There's no alert and no invoice that says you are now an employer of sorts. There is only a December payment to someone you liked working with, and a January deadline you never heard about.

The rule, in plain terms

If you pay someone for services in the course of your business, you may need to report it to the IRS on Form 1099-NEC (Nonemployee Compensation) and send that person a copy. The core test has four parts:

  • You paid for services, not for products or inventory.
  • The payment was for your business, not your personal life. Paying a neighbor to paint your living room doesn't count. Paying a designer for your client work does.
  • The recipient is an individual, partnership, or LLC taxed as one, not a corporation. (There are exceptions, and attorneys' fees are a notable one, so a law firm can still require a form even if it is incorporated.)
  • You paid them at or above the threshold in the calendar year.

The threshold has been $600 for years. Recent legislation raised it to $2,000 for payments made starting in 2026, with inflation adjustments after that. Because this changed recently, check the current IRS instructions for Form 1099-NEC before you rely on any number, including this one. Whatever the threshold, the habit below works the same.

The part people get wrong: how you paid

Here is a quirk that trips up careful people. If you paid your contractor by credit card, debit card, or through a payment platform like PayPal or Stripe, you generally don't report that payment on a 1099-NEC. The payment processor reports those transactions on Form 1099-K instead. The IRS doesn't want the same dollar reported twice.

That means two otherwise identical contractors can land differently. The one you paid by ACH transfer or check needs a form. The one you paid by card typically doesn't. This is also why the method of paying a contractor is worth deciding on purpose rather than by whichever app was open.

Why the form matters to you, not just to them

The 1099-NEC doesn't unlock your deduction. You can deduct legitimate business payments to contractors on your Schedule C whether or not a form was filed. What the form does is document that the payment was real, who received it, and how much.

Skipping it carries its own cost. The IRS can assess a penalty per late or missing form, and the amount rises the longer you wait. It is larger still if the failure looks like deliberate disregard. For a freelancer with one or two contractors, the dollar amounts are modest. The real cost is attention: a notice from the IRS arrives months later, when you've forgotten the details and the contractor has moved on.

There's also a quieter protection. If a contractor never gives you the information the IRS needs, you may be required to withhold part of what you pay them (backup withholding, at a flat 24% rate) and send it to the IRS. Almost nobody wants to do that, and you can avoid it entirely with one document.

The one document that makes January easy

That document is Form W-9, Request for Taxpayer Identification Number and Certification. It's a one-page form where the contractor gives you their legal name, address, tax classification, and Social Security or employer identification number. It is not filed with the IRS. You keep it.

The mistake is asking for it in January. By then the contractor may be slow to answer, gone, or reluctant. Ask before the first payment, when you hold the leverage and they're eager to get started.

A simple rule: no W-9, no first payment. Say it kindly and make it routine. "My accountant needs this on file before I can pay anyone" works, and you never have to say it twice.

Contractor or employee? A quick gut check

The 1099 path only applies if the person is genuinely an independent contractor. The IRS looks at the overall relationship, usually grouped as behavioral control (do you dictate how and when the work is done?), financial control (do they use their own tools and can they profit or lose?), and the nature of the relationship (is it a defined project or an ongoing role woven into your business?).

A designer who works on their own schedule, with their own software, for several clients, fits comfortably. Someone working set hours under your direction, using your equipment, looks more like an employee. Misclassification is a bigger problem than a missing form, and if your situation is close to the line, it's worth a short conversation with a tax professional.

The calendar

The deadline for 1099-NEC is January 31 of the following year, and it applies both to sending the contractor their copy and to filing with the IRS. Unlike many tax deadlines, it generally doesn't get a generous grace period. Mark it now, not in the week it is due.

Your next moves

  • Make a list of everyone you've paid for business services this year. Scan your bank statement and payment apps for freelancers, assistants, editors, and developers. Note the total paid to each and how you paid.
  • Sort the list by payment method. Anyone paid by card or a payment platform likely falls under the processor's 1099-K reporting. Anyone paid by check, ACH, or cash is a candidate for a 1099-NEC if they're above the threshold.
  • Email a W-9 request today to every contractor you expect to cross the threshold, even if the year is nearly over. Attach the blank IRS form and ask them to return it within a week.
  • Create a "no W-9, no payment" template for new contractors. A two-line email you can paste in saves you the awkward conversation next time.
  • Put January 31 in your calendar with a reminder on January 10. Confirm the current threshold and filing options on the IRS's 1099-NEC page, then decide whether you'll file yourself or use an e-file service.

Where this lives in a freelancer's year

There's a gentle irony in all of this. The same awareness that makes you a careful taxpayer, knowing what was paid, to whom, and when, is what makes you a careful payer. Both depend on a record that exists before the deadline, not one you reconstruct in a panic.

That's the habit Payday is built around on the income side: connecting Stripe or your bank so the numbers are already there, calculating your quarterly estimates, nudging you ahead of each due date, and handing you a TurboTax-ready file at the end. If you'd like the money coming in to be as organized as the money going out, you can take a look at Payday. And if you only take the W-9 habit, that's a good year's work already.