1099 Contractor
Short answer
A 1099 contractor is an independent worker or business paid for services who is not an employee. At year-end, a business that paid a qualifying contractor $600 or more generally issues a Form 1099-NEC reporting those payments.
Why it matters
Contractors are handled differently from employees in the books — no payroll taxes are withheld, and different year-end reporting applies. Tracking contractor payments correctly keeps year-end filing and records accurate.
How it works
Payments to qualifying contractors are tracked throughout the year. At year-end, the business reviews totals and generally issues a 1099-NEC to each contractor paid $600 or more, and files copies with the IRS. Specific requirements can depend on the contractor's business type and other factors.
A simple example
A business pays a freelance designer $4,000 over the year for design work. The designer is not an employee, so the business tracks the payments and issues a 1099-NEC at year-end.
A common misunderstanding
Every contractor does not automatically need a 1099. Whether one is required can depend on how the contractor is paid, their business entity type, and other factors. A tax professional can confirm requirements for a specific situation.
Related service
Monthly Bookkeeping
When you may want help
If you pay contractors but are not tracking those payments or are unsure about year-end 1099 filing, contractor tracking within monthly bookkeeping and 1099 filing are available as support.
Written and reviewed by Rachel Armstrong, owner and bookkeeper at Armstrong Quality Financial Services. QuickBooks Online Level 1 ProAdvisor. This entry explains a general concept and is not individualized tax, legal, or investment advice.
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