Subcontractor 1099s: a year-round checklist for contractors

Contractors pay more independent workers than almost any other kind of small business, which makes 1099-NEC reporting a recurring pressure point. The reason it hurts every January is almost never the form itself. It is that W-9s were never collected and payments were never tracked by payee, so the year has to be reconstructed from check stubs.

Collect the W-9 before the first payment

This is the entire game. Once a sub has been paid, your leverage to obtain a completed W-9 drops to nearly zero. Make a signed W-9 a condition of the first payment, alongside a certificate of insurance, and store it where your bookkeeper can reach it rather than in a text thread.

Missing taxpayer identification numbers are not just an inconvenience: the IRS backup withholding rules can require you to withhold from payments to a payee who has not furnished a TIN, and a payer who neither withholds nor reports can end up liable for the amount that should have been withheld. Getting the form up front avoids the entire question.

Know who actually gets a form

• Generally, payments of $600 or more during the calendar year for services performed by a non-employee in the course of your trade or business are reportable on Form 1099-NEC.
• Sole proprietors, partnerships, and most LLCs taxed as partnerships or disregarded entities are reportable; the W-9 tells you which they are.
• Corporations are generally exempt from 1099-NEC reporting, with limited exceptions such as attorneys.
• Payments made by credit card or through certain third-party payment networks are reported by the processor, not by you, so exclude them to avoid double reporting.
• Materials-only vendors are generally not reportable; a combined labor-and-materials invoice from an unincorporated sub generally is.

Thresholds, exemptions, and filing rules change. Confirm the current year's requirements with your tax preparer before filing — this article describes the process, not tax advice.

Track payments by payee all year

Every subcontractor should exist as a vendor record flagged as 1099-eligible, with the TIN from their W-9 attached. Then every payment posts to that vendor. Done consistently, the year-end report is a query rather than a project, and you can see 1099 exposure at any point in the year instead of discovering it in January.

The calendar

1. At engagement: collect the W-9 and the certificate of insurance before the first payment leaves.
2. Monthly: confirm every sub payment is posted to a vendor record with a TIN on file, and flag any that are missing one.
3. October: run a draft 1099 report and chase missing W-9s while there is still time and leverage.
4. December: reconcile the payment totals per vendor and remove card and third-party-network payments.
5. January: file 1099-NEC by the deadline — for recent years, January 31 for both recipient copies and IRS filing. Confirm the exact date each year.

Electronic filing thresholds have tightened in recent years, and businesses filing above a relatively low combined count of information returns are required to file electronically. Your tax preparer will confirm whether that applies to you.

A worked example: one framer, one year

You use the same framing crew on and off all year. Across nine jobs you pay them $47,300 — some by check, some by ACH from the business account, and two payments totaling $3,900 by business credit card because you were in a hurry.

Three things have to be true in your records for January to be uneventful. First, a current W-9 on file with a legal name, business structure, and taxpayer identification number that matches. Second, every one of those payments posted to the same vendor record — not split across Framing Crew, Dave, and Dave Framing LLC, which is how one subcontractor becomes three incomplete ones. Third, the card payments identified, because payments made by card or third-party payment network are reported by the processor rather than by you, and double-counting them overstates what you paid. See bookkeeping for general contractors covers how we keep subcontractor records straight all year.

Get those three right during the year and the year-end report is a click. Get them wrong and you are reconstructing twelve months of payments from bank images in the last week of January, while the subcontractor you need a W-9 from has stopped answering the phone.

The W-9 rule that saves the most pain

Collect the W-9 before the first payment, not before the first deadline. Attach it to the vendor record the day it arrives. A simple policy — no W-9, no check — feels rigid the first time you enforce it and then never causes a problem again. Some contractors add it to the same packet as the certificate of insurance, so one request covers both.

Employee or subcontractor is not your choice to make

Whether someone is genuinely an independent contractor depends on the working relationship — who controls the schedule and methods, who supplies tools, whether they work for others. Getting it wrong carries real consequences, and the tests differ between federal and state rules. This is a question to put to your CPA or an employment attorney with your specific facts, not something to settle from a blog post or a handshake.

Your monthly ten minutes

1. Run a list of vendors paid this month with no W-9 on file, and chase them while the work is fresh.
2. Scan for duplicate vendor records and merge them before payments pile up on both.
3. Confirm subcontractor payments are coded to the right jobs as well as the right vendors — the same transaction serves your 1099 tracking and your job margin.
4. Flag anyone approaching the reporting threshold so nothing surprises you in December.