It’s January 30th. You’re staring at your bank feed trying to remember the last name of the video editor you paid four times last spring via Venmo, and you’re realizing you never got a W-9 from him.
If you paid a contractor more than the reporting threshold last year, this is your problem now. And the S corp vs LLC question you’ve been putting off actually determines part of the answer.
We run a tax and accounting firm, and every January we get the same panicked messages from small business owners, freelancers, and digital nomads who did nothing wrong all year except skip one five-minute step. The good news is that the 1099 process is genuinely simple once somebody lays it out in order. That’s what this is.
First, What a 1099 Actually Is
A 1099 is just a form. It’s how business owners (and sometimes payment processors) report who they paid and how much. You’ve heard of W-2s. Same idea, different relationship.
| Form | Who gets it | Who issues it |
|---|---|---|
| W-2 | Employees of a company | The employer |
| 1099-NEC | Contract workers, freelancers, gig workers | The business that paid them |
Shoot weddings as a photographer? 1099-NEC. Edit video, write copy, second-shoot, consult, or do contract labor of basically any kind? 1099-NEC.
There’s a whole family of these forms, which is where people get confused. A quick decoder:
| Form | What triggers it |
|---|---|
| 1099-NEC | Non-employee compensation (contract work) |
| 1099-MISC | Royalties and certain other payments |
| 1099-DIV | Dividends |
| 1099-INT | Interest income, often from a bank |
| 1099-R | Retirement money you took out |
The one we’re focused on here is the 1099-NEC, because that’s the one you’re on the hook to issue as a business owner.
The Deadline That Kicks Off Everything
January 31. Every year. No creative interpretation available.
Here’s the part most people miss: these forms are what start tax season. You can’t file your return until the 1099s land, and the IRS itself doesn’t open for filing until roughly mid-January anyway. So the sequence is 1099s out the door by January 31, then everything else. Not the other way around.
Who Has to File: The Threshold Rule
If you’re a small business owner, sole proprietor, single-member LLC, or honestly anyone running any kind of business, and you paid a person $600 or more in total across the calendar year for contract work, you issue them a 1099-NEC.
Total. For the whole year. Not $600 in one payment. This trips people up constantly. Four payments of $200 to the same person? That’s $800. That’s a 1099. The threshold is cumulative, and the IRS doesn’t care that each individual payment felt small at the time.
Who Should Not Get a 1099: S Corp vs C Corp and Everything Between
This is where entity structure suddenly matters, and where a lot of well-meaning business owners over-file out of fear.
Generally speaking, payments to corporations don’t require a 1099-NEC. Whether you’re looking at an S corp vs C corp, both sit on the usually-exempt side of the line. Payments to individuals, sole proprietors, and single-member LLCs taxed as sole proprietorships absolutely need one.
The catch is that you can’t tell by looking. An LLC might be taxed as a sole proprietorship, a partnership, or an S corporation, and the name on the invoice tells you nothing. A design shop called “Ramirez Creative LLC” could be any of the three. Which is exactly why the W-9 exists. The form asks the contractor to check the box themselves. You’re not guessing, and you’re not liable for their answer.
“I didn’t think I needed to send one, they’ve got LLC in their name.”
We hear that one plenty. LLC is a legal structure, not a tax classification. Get the W-9 and stop guessing. This is really the crux of the S corp vs LLC decision: the legal label doesn’t tell you anything about the tax treatment underneath it.
One thing worth saying for anyone still figuring out their own setup. Business owners ask us how much it costs to start an LLC before they ask how they’ll actually be taxed, and that’s backwards. Formation is a one-time expense. Your tax classification follows you every year, affects your quarterly payments, and determines whether your own clients need to issue you a 1099. Decide the tax treatment first.
The Five-Step Process
Step 1: Collect the W-9 Before You Pay Anyone
Not after. Before. You need three pieces of information to issue a 1099-NEC:
- Full legal name
- Address
- Social Security number (or EIN)
You do this by having the contractor fill out a W-9 before you pay them a dime. For employees, you’ll use a W-4 instead. Same idea, different form.
This is critical. We see it every year with clients: they start paying people, January hits, and suddenly they’re chasing down a contractor who vanished eight months ago. The info was easy to get in March. Come January, it turns into a hunt.
Make it a rule. No W-9, no payment. Nobody who actually planned to stick around has ever pushed back on that.
Step 2: Build Your List of Who You Paid
If you work with a bookkeeper, this can take ten minutes. Pull your profit and loss statement, look at contract labor, done. If your records aren’t neat, use this checklist:
- P&L or bookkeeping software for anything paid by card or bank transfer
- Venmo transaction history
- PayPal activity
- Cash App history
- Any other payment app you might have used
Go person by person and total what each received for the entire year, then mark everyone over the threshold. Yes, it’s tedious. This is why clean bookkeeping pays off — the people who track this monthly waste no time on it in January.
Step 3: Cross-Check Against the Exemptions
Now compare your list against the W-9s. Individuals, sole proprietors, and single-member LLCs need forms. Corporations usually don’t. If you’re unsure about any specific one, ask your accountant instead of skipping it. A form filed unnecessarily is a smaller problem than one not filed at all.
Step 4: File Them With the IRS
You have two real options.
Do it yourself. Many websites will file for just a few dollars per form. Find one, learn the interface, and go for it if you have the time and the motivation. Just be careful not to mess it up.
Outsource it. This is what we recommend for most clients. Let your accountant or bookkeeper handle it. Set against the time cost and the risk of a wrong SSN or a missed contractor, the fee usually looks reasonable. And if you already have a package where this is included, you shouldn’t be worrying about it in January at all. There’s no award for doing it yourself.
Step 5: Confirm and Close It Out
Once everything is filed, you’re done. Save copies of every W-9 and every filed form in a single folder. Next January, it should be a copy-paste job rather than a digging exercise.
What If a Contractor Won’t Give You Their Info?
This happens. Sometimes people vanish, or get weird about handing over a Social Security number. Here’s what to do:
- Request it in writing. Send the W-9 by email, ask directly, and keep that email. Documented effort matters.
- Follow up a second time with a clear deadline.
- File anyway with the information you have. An incomplete filing backed by a documented effort is much better than pretending the payment never happened.
- Withhold future work until you get the W-9. This is where you have the most leverage, and it’s why Step 1 matters so much.
The real mistake is doing nothing because it feels unsolvable. Silence is the only choice that guarantees a problem.
What If You Receive a 1099 That’s Wrong?
Now let’s flip it. You’re the contractor, a form arrives, and the numbers don’t match your records. Don’t just report the wrong number, and don’t ignore the form either. Reach out to the issuer, show them your records, and request a corrected 1099. Most of the time it’s an honest misunderstanding.
About The Author:
Cameron Botes is the founder of BizBud, a tax and accounting firm built for content creators, influencers, digital nomads, and entrepreneurs building businesses across borders. A former professional soccer player across four continents, Cameron brings the same discipline, preparation, and pressure-tested execution from his athletic career into helping business owners plan ahead, stay compliant, and keep more control over their financial future.
Since founding BizBud in 2020, Cameron has grown the firm from a one-person practice into a team of CPAs and tax advisors serving hundreds of clients across the U.S. and around the world. With an MBA in finance and accounting, international business experience, and a team with backgrounds at firms like PwC, Deloitte, and EY, Cameron helps creators and founders simplify taxes, clean up their books, and build smarter systems so they can focus on the work they actually love.
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