Do I need to send 1099s to the freelancers my agency hires?
Yes. Any freelancer your agency pays $600 or more during the calendar year needs to receive a 1099-NEC by January 31 of the following year. This applies to individuals, sole proprietors, partnerships, and LLCs that haven’t elected to be taxed as corporations.
Corporations are generally exempt. If a freelancer’s W-9 shows they operate as an S-corp or C-corp, you don’t need to send them a 1099. Most freelance designers, writers, and photographers operate as sole proprietors or single-member LLCs, so they’ll need one.
Collect W-9 forms before you pay anyone for the first time. The W-9 gives you the freelancer’s legal name, business name, address, and tax identification number. Without this information, you can’t prepare accurate 1099s at year end. Chasing down W-9s in January when you’re trying to meet the filing deadline is stressful and sometimes impossible if freelancers have moved on.
Track payments throughout the year by freelancer. Your accounting software should make this straightforward if you’re coding payments to vendor records consistently. Bookkeeping for service based businesses and nonprofits should include this kind of vendor tracking as standard practice. At year end, run a report showing total payments per vendor. Anyone at $600 or more who isn’t a corporation gets a 1099-NEC.
New York adds another requirement that many agency owners miss. The Freelance Isn’t Free Act requires written contracts for any freelance engagement totaling $800 or more. The contract must include scope of work, payment amount, and payment due date. While this isn’t directly about 1099s, it means you should already have documentation in place for most freelancers who will need one.
The January 31 deadline is firm for both the freelancer copy and the IRS filing. Late filing triggers penalties that increase the longer you wait. Filing within 30 days of the deadline costs $60 per form. After August 1 it jumps to $330 per form. Intentional disregard pushes penalties even higher.
If you work with a handful of freelancers, 1099 preparation is straightforward. Agencies that hire dozens of freelancers throughout the year need better systems for W-9 collection and payment tracking to avoid a January scramble.
The pattern that works is treating the W-9 like onboarding paperwork. No W-9, no first payment. Track vendor payments in a way that makes year-end reporting simple. If you’re not sure which freelancers need 1099s or whether your records are complete, sort that out before December ends rather than discovering problems when the deadline is days away.
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