How to Generate a 1099 Form for Contractors (2025 Guide)
Every business that pays an independent contractor $600 or more in a tax year must file a 1099-NEC with the IRS and deliver a copy to the contractor. Here is exactly how to generate a 1099 form — step by step — whether you hire one freelancer or dozens.
What Is a 1099 Form?
A 1099 is an IRS information return that reports income paid to someone who is nota W2 employee. There are many 1099 variants — 1099-INT for interest, 1099-DIV for dividends, 1099-K for payment card transactions — but the one businesses deal with most often is the 1099-NEC (Nonemployee Compensation).
The 1099-NEC replaced the old Box 7 on Form 1099-MISC starting in tax year 2020. It is used exclusively to report payments to independent contractors, freelancers, consultants, and other non-employees.
When you generate a 1099 form, you are creating this document with the payer's information (your business), the recipient's information (the contractor), and the total amount paid during the tax year.
Who Needs to File a 1099?
You must file a 1099-NEC if all of these are true:
- You paid an individual or non-corporate entity (sole proprietor, partnership, LLC taxed as a partnership or sole prop)
- The payment was for services (not goods)
- Total payments during the tax year were $600 or more
- The recipient is not a C-corporation or S-corporation (with some exceptions for attorneys and medical/health payments)
Common examples: a graphic designer who created your logo, a web developer who built your site, a bookkeeper who manages your accounts, a plumber who fixed your office pipes, a marketing consultant, a freelance writer, or a rideshare driver working through your platform.
You do NOT need a 1099 for: payments to corporations (except attorneys and medical providers), payments for merchandise or goods, payments made via credit card or payment apps like PayPal or Venmo (these are reported on 1099-K by the payment processor), or payments under $600.
1099-NEC vs 1099-MISC: Which Do You Need?
| Payment Type | Form | Box |
|---|---|---|
| Contractor/freelancer services | 1099-NEC | Box 1 |
| Rent payments ($600+) | 1099-MISC | Box 1 |
| Royalties ($10+) | 1099-MISC | Box 2 |
| Prizes and awards ($600+) | 1099-MISC | Box 3 |
| Attorney fees ($600+) | 1099-NEC | Box 1 |
| Medical/health payments ($600+) | 1099-MISC | Box 6 |
| Crop insurance proceeds | 1099-MISC | Box 9 |
If you are paying an independent contractor for services, you need the 1099-NEC. Most small businesses and freelance-hiring companies use this form exclusively.
Information You Need Before You Start
Gather these details before generating your 1099 form:
- • Legal business name
- • Business address
- • EIN (Employer Identification Number)
- • Phone number
- • Legal name (or business name)
- • Mailing address
- • TIN (SSN or EIN)
- • Total amount paid in the tax year
Pro tip: Collect a completed W-9 form from every contractor beforeyou pay them. The W-9 provides their legal name, address, TIN, and entity type — everything you need to generate the 1099 at year-end. Without a W-9 on file, you may need to apply backup withholding at 24%.
Step-by-Step: Generate a 1099 Form
Step 1: Collect W-9s from All Contractors
Before you can generate a 1099, you need each contractor's taxpayer information. Send them a blank W-9 (available free on IRS.gov) and keep the completed form in your records. You should request this when you first engage the contractor, not at year-end.
Step 2: Calculate Total Payments
Add up every payment made to the contractor during the calendar year (January 1 through December 31). Include all checks, direct deposits, and wire transfers. Do notinclude payments made through credit cards or third-party payment processors like PayPal — those are reported by the processor on Form 1099-K.
Step 3: Choose Your Filing Method
You can file 1099s on paper (order official forms from the IRS), e-file through the IRS IRIS portal, or use a 1099 form generator like StubFast to create the forms. E-filing is mandatory if you are filing 10 or more 1099 forms. For small businesses filing fewer than 10, any method works.
Step 4: Fill In the 1099-NEC Form
Enter your business information (payer), the contractor's information (recipient), and the total compensation amount in Box 1. If you withheld any federal or state income tax, enter those amounts in the appropriate boxes. Mark the “CORRECTED” checkbox only if you are amending a previously filed form.
Step 5: Distribute Copies
The 1099-NEC has multiple copies. Copy A goes to the IRS. Copy B goes to the contractor. Copy C is for your records. If your state requires it, Copy 1 goes to the state tax authority.
Step 6: File with the IRS
Submit Copy A to the IRS by the January 31 deadline. If filing on paper, also include transmittal Form 1096, which summarizes all your 1099 filings. E-filing through IRIS does not require a 1096.
Filing Methods Compared
| Method | Cost | Best For | Notes |
|---|---|---|---|
| IRS IRIS Portal | Free | Businesses filing any volume | E-file only; account setup required |
| Paper forms (IRS order) | Free (forms) | < 10 forms | Must order official red-ink forms; requires 1096 |
| 1099 form generator (StubFast) | Free preview | Quick single forms | Instant PDF; fill in and download |
| Accounting software (QuickBooks, Wave) | $15–50/form | Businesses already using the software | Integrated with bookkeeping |
| CPA/tax professional | $50–150/form | Complex situations | Professional guidance included |
For most small businesses and sole proprietors who hire a handful of contractors, an online 1099 form generator is the fastest option. You fill in the details, preview the completed form, and download a PDF — all without creating an IRS account or ordering paper forms.
1099 Filing Deadlines for 2025
Unlike 1099-MISC, the 1099-NEC does not have an automatic 30-day extension for e-filing. The January 31 deadline is firm. You can request one 30-day extension using Form 8809, but approval is not guaranteed, and the IRS only grants extensions for extraordinary circumstances.
Penalties for Not Filing
The IRS imposes escalating penalties based on how late you file:
| How Late | Penalty Per Form | Max (Small Business) |
|---|---|---|
| Within 30 days | $60 | $232,500 |
| 31 days late through Aug 1 | $130 | $664,500 |
| After Aug 1 or not filed | $310 | $1,329,000 |
| Intentional disregard | $630 | No maximum |
Small businesses with average annual gross receipts of $5 million or less have lower maximum penalties. But even at the small business rate, penalties add up quickly if you have multiple unfiled forms.
Beyond IRS penalties, failing to file a 1099 means you may lose the ability to deduct the contractor payment as a business expense — and the contractor may underreport income, creating issues for both parties.
Common Mistakes to Avoid
Contractor payments go on 1099-NEC, not 1099-MISC. Using the wrong form can delay processing and trigger IRS notices.
A mismatched name/TIN combination triggers a B-notice from the IRS. Always verify the contractor's TIN against their W-9 before filing. You can use the IRS TIN Matching program to verify electronically.
Payments made via credit card, debit card, PayPal, Venmo, or other third-party settlement organizations should not be included on a 1099-NEC. Those are reported by the payment processor on Form 1099-K.
You generally do not need to file a 1099 for payments to C-corporations or S-corporations. Exceptions include payments to attorneys and medical/health care providers, which require 1099s regardless of entity type.
January 31 is the deadline for bothfiling with the IRS and delivering copies to contractors. Many businesses remember to file with the IRS but forget to mail or email the contractor's copy on time.
Many states require a copy of the 1099-NEC filed with the state tax authority. Some participate in the Combined Federal/State Filing Program (CF/SF), where the IRS forwards your filing to the state automatically — but not all states participate.
For Contractors: What to Do with a 1099
If you are a contractor who received a 1099-NEC, here is what it means for you:
- Report the income on Schedule C of your personal tax return (Form 1040). The 1099-NEC amount goes on the income line of your Schedule C.
- Pay self-employment tax. As a contractor, you owe 15.3% SE tax (12.4% Social Security + 2.9% Medicare) on your net self-employment earnings. Use Schedule SE to calculate this.
- Deduct business expenses. Subtract legitimate business expenses (home office, equipment, software, mileage, supplies) on Schedule C to reduce your taxable income.
- Make quarterly estimated payments. If you expect to owe $1,000 or more in taxes, the IRS requires quarterly estimated payments (Form 1040-ES) to avoid underpayment penalties.
Even if you don't receive a 1099 (for example, if a client paid you less than $600), you are still required to report all income on your tax return.
Do 1099 Contractors Need Pay Stubs?
A 1099 form is an annual tax document — it reports total yearly compensation. It does not serve as ongoing proof of income. If you need to show income for an apartment application, car loan, or mortgage, a 1099 alone is usually not enough.
That is where 1099 pay stubscome in. A pay stub breaks your income into pay periods, showing gross pay, estimated taxes, and net pay — the format landlords and lenders recognize. You can generate 1099 contractor pay stubs alongside your 1099 form to cover both annual tax filing and ongoing income verification.
Frequently Asked Questions
January 31 of the year following the tax year. This applies to both filing Copy A with the IRS and delivering Copy B to the contractor. If January 31 falls on a weekend, the deadline shifts to the next business day.
No. The $600 threshold is per contractor, per year. If you paid a contractor less than $600 during the calendar year, you are not required to file a 1099-NEC. However, the contractor still must report the income.
Yes. The IRS IRIS portal allows free e-filing. Online 1099 generators like StubFast let you create a 1099-NEC with a free preview and download a clean PDF for your records or to send to contractors.
1099-NEC reports nonemployee compensation (contractor payments for services). 1099-MISC covers other payment types like rent, royalties, prizes, and certain medical payments. Before 2020, contractor payments were reported on 1099-MISC Box 7.
IRS penalties range from $60 to $310 per form depending on how late you file, with a $630 penalty per form for intentional disregard. You may also lose the business deduction for that contractor payment.
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