How To Create and Send a 1099 Form to Your Contractors

What you need to do before you create a 1099

You create a 1099 form when you have paid a contractor or freelancer $600 or more during a calendar year. The form reports that payment to the IRS and to the person who received it. Before you sit down to fill one out, you need three things: the contractor's full legal name, their Taxpayer Identification Number (usually a Social Security Number or EIN), and their mailing address. You also need the exact dollar amount you paid them during the year.

The most common mistake is waiting until January to gather this information. Contractors move, change business names, and close accounts. Ask for their TIN and current address in writing when you first hire them — email counts — so you have it on file. If you cannot locate a contractor after a reasonable effort, the IRS has rules for what to do, but it is far simpler to collect the information upfront.

You will file a Form 1099-NEC (Nonemployee Compensation) for most contractors. If you paid someone for rent, royalties, or other specific income types, you may need a different 1099 form. The IRS website lists all 1099 variants by payment type.

Key Takeaways

• You must issue a 1099-NEC to any contractor you paid $600 or more in a single calendar year, and send them a copy by January 31.
• You need the contractor's legal name, Taxpayer Identification Number, mailing address, and the total amount paid — collect this when you hire them, not in January.
• You file copies with the IRS on Form 1096 (the transmittal sheet) along with all your 1099s, also by January 31.
• If a contractor gives you a false TIN or refuses to provide one, you must withhold 24 percent of their payments and report it separately to the IRS.
• The IRS accepts 1099s filed on paper, through tax software, or through a payroll service — the method depends on how many contractors you have and whether you file other employment forms.

Filling out the boxes on Form 1099-NEC

The 1099-NEC has two main sections: boxes for your information at the top, and boxes for the contractor's information below. Start with your side. Box 1a asks for your name and address as the business that paid them. Box b asks for your Employer Identification Number (EIN) — if you are a sole proprietor without an EIN, leave it blank or enter your Social Security Number, depending on your tax software's instructions.

Next, fill in the contractor's information. Box 1 (the large box on the left) holds their name exactly as it appears on their tax return — ask them if you are unsure. Box 2 holds their Taxpayer Identification Number. Boxes 3 through 8 are for specific income types: Box 3 is "Other income," Box 4 is "Federal income tax withheld," and so on. For most contractor payments, you will only use Box 1 (the total nonemployee compensation) and Box 2 (their TIN).

Box 5 asks whether you have a foreign address for the contractor. Box 6 asks for an account number if you want to track which project or invoice the payment relates to — this is optional and mainly useful if you pay the same contractor many times. The bottom section asks for the contractor's mailing address and state tax ID if your state requires it.

How to file your 1099s with the IRS

You have three main routes: paper filing, electronic filing through tax software, or using a payroll service. The method you choose depends on how many contractors you have and whether you already file other employment forms like W-2s.

If you file on paper, you print the 1099-NEC forms (available free from the IRS website or from tax software), fill them out by hand or by computer, and mail them to the IRS along with a Form 1096 (the transmittal sheet that summarizes all your 1099s). The 1096 tells the IRS how many 1099s you are sending and the total amount reported. You keep one copy for your records, send one to the contractor, and send the remaining copies to the IRS. The important date is January 31.

If you file electronically, you use tax software (such as TurboTax, H&R Block, or IRS Free File partners) or a payroll service (such as Guidepoint, ADP, or Paychex). These services handle the formatting and transmission to the IRS for you. Electronic filing is faster and reduces errors because the software validates your entries before sending. Most services charge a small fee per form.

If you have only one or two contractors, tax software is usually the cheapest route. If you have ten or more, or if you also file W-2s for employees, a payroll service often saves time and reduces mistakes. The IRS also offers FIRE (Filing Information Returns Electronically), a free system for businesses that file many returns, though it requires more technical setup.

Sending a copy to the contractor

By January 31, you must send the contractor a copy of the 1099-NEC showing what you paid them. This is their copy — they use it to file their own tax return. Send it to the address they gave you, or to the address on file if they moved and did not tell you. If the form is returned as undeliverable, keep the returned envelope as proof you tried.

You can send the 1099 by mail, email, or through an online portal if the contractor has one. If you email it, send it as a PDF so the formatting stays intact. Some contractors prefer email because they receive it faster and can store it digitally. If you mail it, send it early enough that it arrives by January 31 — do not wait until January 30.

The contractor needs this form to file their tax return. If they do not receive it and file without it, the IRS will match their return against the 1099 you filed and may send them a notice asking for the missing income. Keeping a record of when and how you sent each 1099 protects you if a contractor later claims they never received it.

What to do if a contractor will not give you their TIN

If a contractor refuses to provide a Taxpayer Identification Number or gives you one that does not match IRS records, you must withhold 24 percent of their payments as backup withholding. This means if you owe them $1,000, you send them $760 and withhold $240 to send to the IRS.

Before you withhold, send the contractor a written notice (email is acceptable) stating that you need a valid TIN and explaining the withholding requirement. Give them at least 30 days to respond. If they still do not provide one, begin withholding on the next payment. You report the withheld amount on Form 1099-NEC in Box 4 (Federal income tax withheld) and file Form 945 (Annual Return of Withheld Federal Income Tax) with the IRS by April 15.

Backup withholding is rare but necessary because the IRS uses TINs to match income reports to tax returns. Without it, there is no way to verify the contractor actually reported the income you paid them.

Common mistakes to avoid

The most frequent error is using the wrong form. A 1099-NEC is for nonemployee compensation — work done by an independent contractor. If you paid someone as an employee (meaning you control how and when they work), you file a W-2 instead. If you paid for rent, royalties, or prizes, you use a different 1099 form. Check the IRS instructions for your payment type before you start.

Another common mistake is rounding the payment amount. If you paid a contractor $1,250.47, report $1,250.47, not $1,250. The IRS matches 1099s to contractor tax returns line by line, and rounding creates a mismatch that triggers an audit notice.

A third mistake is missing the January 31 important date. The IRS charges penalties for late 1099 filing — $50 per form if you file within 30 days late, $100 per form if you file more than 30 days late. If you realize in February that you missed the important date, file when ready anyway. Late is better than never.

Finally, do not assume a contractor will report the income correctly just because you sent them a 1099. The IRS receives your copy and the contractor's copy. If they do not match, the IRS will contact the contractor. You have done your part by filing accurately and on time.

Frequently Asked Questions

Do I have to issue a 1099 if I paid someone less than $600?

No. The IRS threshold is $600 per contractor per calendar year. If you paid someone $400 total in 2024, you do not file a 1099 for them. However, some states have lower thresholds — check your state tax authority's rules. You should still keep records of all payments for your own accounting.

What if I paid a contractor but do not know their Social Security Number?

Ask them directly. Send an email or letter requesting their Taxpayer Identification Number, explaining that you need it to file their 1099. If they do not respond within 30 days, you must withhold 24 percent of future payments. Do not guess or use a made-up number — the IRS will flag it as invalid.

Can I file 1099s after January 31?

Yes, but you will owe a penalty. The penalty is $50 per form if you file within 30 days late, and $100 per form if you file more than 30 days late. File as soon as you realize you missed the important date. The penalty is less painful than the IRS contacting you about missing returns.

Do I need to file a 1099 for a business I paid, or only for individuals?

It depends on the business structure. If you paid a sole proprietor or a single-member LLC, you file a 1099-NEC. If you paid a corporation, partnership, or multi-member LLC, you generally do not file a 1099 — ask the business for their business structure when you hire them. If you are unsure, file the 1099; it is safer than not filing.

What if I made a mistake on a 1099 I already filed?

File a corrected 1099-NEC using the same form but checking the "Corrected" box at the top. Send the corrected version to the contractor and file it with the IRS. You do not need to withdraw the original — the IRS will match the corrected version to your account and update their records.