marketer.law / Knowledge
What is a 1099?
The IRS form a business uses to report payments to independent contractors — and what it means for both sides.
The plain-English answer
A 1099-NEC (Nonemployee Compensation) is the IRS form a business files when it pays an independent contractor $600 or more in a calendar year. "1099" has become shorthand for the whole contractor relationship — the tax treatment, the legal status, and the agreement structure that supports it.
Two things happen when a 1099 is issued: the IRS finds out about the income, and the contractor is confirmed to be responsible for their own taxes. No withholding, no W-2, no payroll taxes from you.
The $600 threshold is the filing trigger. But the legal classification as an independent contractor — not an employee — has to be defensible regardless of the dollar amount. A $500 job done by a worker you control is still an employment relationship. The 1099 doesn't make someone a contractor; the nature of the work relationship does.
What it means for your business
If you issue 1099s (you hire contractors)
- ✓Collect a W-9 from every contractor before the first payment — not at year-end.
- ✓Track all payments by contractor across the year. Your accounting software should do this automatically.
- ✓Issue 1099-NEC by January 31 for every contractor paid $600+ in the prior year.
- ✓File Copy A with the IRS by January 31 (same deadline since 2020).
- ✓Payments to corporations (not LLC sole-proprietors) are generally exempt — confirm via W-9.
The classification problem
The IRS and the Department of Labor each have their own tests for what makes someone an independent contractor. Calling a worker a "1099 contractor" doesn't make them one. If the worker only does work for you, follows your schedule, uses your tools, and works under your supervision — they may be an employee legally, regardless of what you call them. Misclassification triggers back payroll taxes, penalties, and unpaid benefits exposure. See What is an independent contractor? for the tests.
If you receive 1099s (you are the contractor)
- ✓Report all income on Schedule C (sole proprietor) or your business return — whether or not you received a 1099.
- ✓Self-employment tax is 15.3% on net earnings. This covers both the employee and employer share of Social Security and Medicare.
- ✓Make quarterly estimated payments to the IRS (April 15, June 15, September 15, January 15) or face underpayment penalties.
- ✓Your MSA and SOW structure supports your independent contractor status — keep them signed and filed.
The best defense against a misclassification claim — from either the IRS or a state labor agency — is a properly structured Master Services Agreement (MSA) that establishes the relationship clearly. Language matters. Generic templates often include the wrong indicia.
Where marketer.law fits
The 1099 relationship is only as clean as the agreement underneath it. A contractor without a signed agreement is a liability waiting to surface.
- ✓Solopreneur — $49/mo — Freelance marketers and fractional CMOs. Stop sending clients a contract you found in a Google Doc.
- ✓Consultant — $69/mo — Run your agency's legal like a real business. Client retainers and creator agreements in one place.
- ✓SMB — $99/mo — Full-service shops with a bench of creators and a roster of clients.
Related
[
What's an independent contractor?
The legal definition, the classification tests, and why misclassification is expensive.
](https://marketer.law/knowledge/what-is-an-independent-contractor)[
What's an MSA?
The master agreement that governs your ongoing client relationships.
](https://marketer.law/knowledge/what-is-an-msa)[
What's an SOW?
The statement of work that defines each specific project under your MSA.
](https://marketer.law/knowledge/what-is-an-sow)[
What's IP?
Who owns the work product — and how to make sure you get the assignment you need.
](https://marketer.law/knowledge/what-is-ip)
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