A Complete Guide to Sending 1099 Forms to Independent Workers

For businesses that engage independent contractors, freelancers, or other non-employee workers, issuing IRS Form 1099 is crucial for compliance with tax laws. However, many business owners find the process confusing, particularly when it comes to deadlines and the potential consequences of missing them. This guide to sending 1099 forms outlines the key steps for sending out the forms, the risks associated with non-compliance, and important information for both businesses and workers to effectively manage this tax responsibility.

What are 1099 Forms?

A 1099 form is an IRS tax form used to report income other than wages, salaries, and tips. Businesses must issue a 1099-NEC (Nonemployee Compensation) to any contractor or freelancer they paid $600 or more in a given tax year for services rendered. The form provides a record of income for the contractor and helps the IRS track taxable earnings.

Deadline for Sending 1099 Forms

The deadline to send 1099-NEC forms to independent contractors is January 31 following the tax year in question. This deadline applies whether January 31 falls on a weekday or weekend. When this date falls on a holiday the deadline will likely be shifted to the next day.

Additionally, businesses must file copies of 1099 forms with the IRS. If filing electronically, the deadline to submit the forms to the IRS is also January 31. For those filing on paper, ensure your forms are postmarked by this date.

For example: For Tax Season 2024, a 1099 must be filed by January 31, 2025.

Consequences of Missing the Deadline for Sending 1099 Forms

Failing to follow through with sending 1099 forms by the January 31 deadline can lead to significant consequences for your business:

1. Financial Penalties:
   • The IRS imposes penalties for each late or incorrectly filed 1099 form. As of 2025, the penalties are as follows:
     • $60 per form when filed within 30 days past the deadline.
     • $120 per form when filed more than 30 days late but before August 1.
     • $310 per form when filed after August 1 or not filed at all.
2. Increased IRS Scrutiny:
   • Consistently failing to comply with 1099 filing requirements could draw unwanted attention from the IRS, potentially triggering audits or further investigations.
3. Damage to Business Reputation:
   • Delays or failures in issuing 1099s can damage relationships with contractors who rely on accurate forms for their tax filings. Dissatisfied workers may choose not to work with your business again.

Consequences for Contractors if Businesses Fail to Send 1099 Forms

When businesses fail to follow the guidelines for sending 1099 forms, it creates challenges for contractors as well:

1. Tax Filing Complications:
   • Independent contractors are still responsible for reporting their income to the IRS, whether they receive a 1099 form or not. Without a 1099, contractors may struggle to verify the exact amount they earned.
2. Delayed Refunds or Penalties:
   • Contractors who don’t have the correct documentation might file their taxes late, risking penalties and delays in receiving tax refunds.
3. Potential Misreporting:
   • Errors in self-reported income due to missing 1099s can lead to IRS penalties for the contractor, even though the issue originated with the business.

What Contractors Can Do if They Don’t Receive a Form 1099

If you’re a contractor and the company you worked for doesn’t issue your 1099 by January 31, here are the steps you can take:

1. Contact the Business:
   • Reach out to the company’s payroll or accounting department to remind them of the missing form. Sometimes, delays occur due to oversight or errors.
2. Use Records of Payment:
   • If the 1099 doesn’t arrive, you can still report your income using other records, such as invoices, bank statements, or payment processor reports (e.g., PayPal, Venmo).
3. File Form 4852:
   • If you cannot get the missing 1099 form, you can use IRS Form 4852 (Substitute for Form W-2, Wage and Tax Statement or Form 1099-R) to report your income when filing your taxes.
4. Report the Issue to the IRS:
   • If the business refuses to provide a 1099 form, you can file Form 3949-A to inform the IRS of potential non-compliance. While this won’t delay your tax filing responsibilities, it alerts the IRS to the company’s failure.

Tips for Businesses to Stay 1099 Compliant

To ensure you meet your 1099 obligations, follow these best practices:

1. Maintain Accurate Records:
   • Keep thorough records of all payments to contractors, including amounts paid, dates, and contact information. An accounting software can help to streamline tax filing and other necessary business bookkeeping.
2. Collect W-9 Forms Early:
   • Before making payments to contractors, request a completed W-9 form (Request for Taxpayer Identification Number and Certification). This form provides the necessary information for issuing 1099s.
3. Leverage Technology:
   • Use tax software or hire a payroll service to handle 1099 preparation and filing. Many tools automatically generate and e-file forms, reducing the risk of errors or missed deadlines.
4. Set Reminders:
   • Add key dates to your calendar, such as the January 31 deadline, to ensure timely action.
5. Seek Professional Advice:
   • Consult with an accountant or tax professional if you have questions about your 1099 obligations.

Getting Help with Sending 1099 Forms

Sending out 1099 forms may seem like a small administrative task, but it has significant implications for your business and the contractors you work with. By adhering to deadlines, maintaining accurate records, and leveraging the right tools, you can avoid costly penalties and maintain positive relationships with your contractors. For contractors, staying proactive and using available resources can help mitigate the challenges of missing 1099s. Compliance isn’t just about avoiding penalties; it’s about building trust and ensuring smooth operations for everyone involved.

In light of the complexities and potential pitfalls associated with sending 1099 forms, small business owners would greatly benefit from partnering with a professional tax service. Cowdery Tax and Buiness Solutions offers expert assistance in managing all aspects of 1099 filings, ensuring compliance with IRS regulations and providing peace of mind. By leveraging our knowledge and resources, you can streamline the process, minimize the risk of errors, and maintain positive relationships with your independent contractors. Trusting us with this task allows you to focus on growing your business while we take care of your tax responsibilities efficiently.

This information is not intended as legal or tax advice. Cowdery Tax and its representatives does not offer legal or tax advice. We offer services for business bookkeeping, payroll, tax payments, and personal tax filings. We share information that is publicly available. Tax laws may change with or without notice that may alter or change the information contained in this publication.