If you run a construction business, you rely on independent contractors or subcontractors to help get the job done. From electricians to drywall specialists, these professionals often play an essential role in completing projects. But when tax season rolls around, your responsibility doesn’t end with writing checks. If you’ve paid an independent contractor $600 or more during the year, you’re likely required to issue a 1099-NEC form.
Not filing these forms correctly or on time can lead to expensive penalties and unnecessary stress. Here’s what every construction business owner should know about 1099s.
Who Needs a 1099?
Any independent contractor, freelancer, or subcontractor you’ve paid $600 or more should receive a 1099-NEC. This doesn’t apply to employees (who receive a W-2) or corporations in most cases, but it does apply to individuals and many small businesses you hire.
Collect W-9 Forms Upfront
One of the most common mistakes business owners make is waiting until tax season to track down contractors’ information. Avoid the hassle by having every contractor complete a W-9 before they begin work. This form provides their legal name, address, and taxpayer identification number, everything you’ll need when it’s time to issue their 1099.
Deadlines Matter
The IRS requires that 1099-NEC forms be issued to contractors and filed with the IRS by January 31st. Missing this deadline can lead to steep penalties. Sending the forms late or using the wrong form can cost your business money.
Avoid Common Errors
Simple mistakes, such as typos, mismatched amounts, or incorrect taxpayer IDs, can result in rejected filings and IRS notices. The best way to avoid these problems is to maintain accurate records throughout the year, not just at tax season.
The Benefits of Professional Help
Many construction business owners underestimate the time and detail required to stay compliant with 1099 reporting. Outsourcing this responsibility to an accountant not only saves you time but also ensures accuracy and peace of mind.
At Nailed It Accounting, we specialize in helping construction business owners manage subcontractor payments, prepare 1099s, and stay IRS-compliant. With our support, you can focus on running projects while we handle the paperwork. Contact us today to simplify your 1099 process and avoid the stress of tax season surprises.