A 1099 is an information return — a document used to report income paid to someone that isn't an employee. The IRS receives a copy, the recipient receives a copy, and the payer keeps a copy. It's essentially the IRS's way of cross-checking that all the income flowing around the economy is being reported on someone's tax return.

There are many types of 1099 forms, but the ones most relevant to solopreneurs are:

1099-NEC (Nonemployee Compensation): Used to report payments to independent contractors and freelancers 1099-MISC (Miscellaneous Income): Used for rent, prizes, awards, medical payments, and some other specific payment types 1099-K (Payment Card and Third-Party Network Transactions): Issued by payment processors like PayPal, Stripe, and Venmo when you meet their reporting thresholds

If a business paid you $600 or more in a calendar year for freelance work or services, they're required to send you a 1099-NEC by January 31 of the following year. When you get that form, here's what you need to know:

The IRS already has a copy. The payer files the 1099 with the IRS simultaneously. If the income on your 1099s doesn't show up on your tax return, the IRS computer matching program will flag it. This is a computer-automated process, and it's very good at its job.

Report all income, including amounts under $600. Not all clients are required to send 1099s — some won't, especially smaller businesses. But that doesn't mean the income is off the books. You're required to report all self-employment income regardless of whether a 1099 was issued. That cash you received for a small project? It goes on Schedule C.

A 1099 is not a tax bill. Receiving a 1099 for $15,000 doesn't mean you owe taxes on $15,000. That income is reduced by your deductible business expenses before tax is calculated. The 1099 just confirms the gross amount paid.

What if a 1099 is wrong? It happens. A client sends you a 1099-NEC that overstates what they actually paid you. Contact the payer first and ask them to issue a corrected 1099-C. If they won't, you can still file your return accurately with a notation about the discrepancy. Keep documentation of the correct amount.

The 1099-K rules have been in flux for several years. Here's the current status:

Originally, payment processors (PayPal, Venmo Business, Stripe, etc.) only had to issue 1099-Ks when a user received more than $20,000 in payments AND had more than 200 transactions. The American Rescue Plan Act of 2021 lowered that threshold to $600 — but implementation was delayed due to the enormous confusion it created.

For 2025, the IRS has announced a phased implementation:

For tax year 2024 (filed in 2025): The threshold is $5,000 For tax year 2025 (filed in 2026): The threshold drops to $2,500 For tax year 2026 onwards: The $600 threshold takes full effect This means even small-volume solopreneurs processing payments through Stripe, PayPal, Square, or similar processors may receive a 1099-K for the first time. Don't panic — but do make sure the income reported on your 1099-K matches what you've actually been recording as income.

One critical point: personal transactions sent through Venmo or PayPal (splitting a dinner, paying rent to a roommate, gift money) are not taxable income. But you may need to demonstrate that by keeping records of what those payments were for.

Once your business starts paying contractors, you inherit the obligations that your clients have toward you. Here's the full breakdown:

You must issue a 1099-NEC to an individual or unincorporated business (partnership, LLC taxed as sole prop) when:

You paid them $600 or more in a calendar year The payment was for services (not goods) They are not your employee Common recipients: freelancers, virtual assistants, subcontractors, photographers, web developers, copywriters, bookkeepers, and consultants.

You do not need to issue a 1099-NEC when:

The recipient is a C corporation or S corporation (they're generally exempt — though payments for legal or medical services to corporations ARE still reported on 1099-MISC) The payment was made via credit card, debit card, or PayPal — in that case, the payment processor handles 1099-K reporting The total paid was under $600

Before paying any contractor, get a completed Form W-9 from them. This form collects their legal name, business name, address, EIN (or SSN), and entity type. Without a W-9, you don't have the information you need to file 1099s correctly. And if a contractor refuses to provide a W- 9, you're required to apply backup withholding of 24% on their payments.

Make W-9 collection a standard part of your contractor onboarding. Every new contractor, before they do any work, provides a W-9. Keep these on file for at least four years.

To recipients: 1099-NEC forms must be delivered (mailed or electronically) to recipients by January 31.

To the IRS: You must also file copies with the IRS by January 31 (whether filing electronically or by paper). Note that 1099-MISC has different deadlines depending on whether it includes Box 7 (rent) — January 31 for Box 7, February 28 for paper filers or March 31 for electronic filers otherwise.

If you're filing 10 or more information returns of the same type, you're required to file electronically. For most solopreneurs, that threshold isn't an issue, but it's something to know as you scale.

The IRS takes 1099 non-compliance seriously. The penalty for failing to file a correct 1099 ranges from $60 to $330 per form (for 2025), depending on how late you file. If the IRS determines the failure was intentional, the minimum penalty is $660 per form — with no cap.

These numbers add up fast. If you've paid 10 contractors and forgot all 10 1099s, you're looking at penalties of $600–$3,300 for inadvertent failure. Intentional neglect could mean $6,600.

For one or two contractors: The IRS's own FIRE (Filing Information Returns Electronically) system is free, though slightly cumbersome. You can also mail paper forms ordered free from the IRS.

For simplicity: Services like Track1099, Tax1099, or Yearli make filing 1099s straightforward. You enter the recipient's information, upload payment amounts, and they handle both recipient delivery and IRS filing — typically for a few dollars per form.

Many accounting platforms (QuickBooks, FreshBooks, Wave) have built-in 1099 workflows that streamline the process if you've been tracking contractor payments throughout the year.

The 1099 ecosystem sounds bureaucratic, but the actual workflow is manageable once you have a system. Collect W-9s before paying any contractor. Track payments throughout the year. File by January 31. When you receive 1099s, verify the amounts, report the income accurately, and don't let the form itself scare you — it's just documentation of money you've already earned.

Get ahead of it now: Pull your contractor payment history for the year, confirm you have W-9s on file for everyone who might cross $600, and add a 1099 preparation task to your December calendar. January is always faster for the people who prepared in December.

If you pay contractors, see how to hire one legally and the 1099 vs W-2 distinction. If platforms process your revenue, Stripe/PayPal/Square reporting explains how 1099-Ks intersect with your books.