Taxes can be confusing, especially when you are running a small business or freelancing across borders. One of the most common forms that causes uncertainty is the Form 1099. Many founders and contractors hear about it each year but are not always sure when or how it applies to them.
At Bookmate, we help hundreds of digital founders and remote businesses handle 1099 filings correctly, ensuring they remain compliant while keeping things simple. In this article, we explain what a 1099 is, when you need to file it, and how it affects both U.S. and international entrepreneurs.
What Is Form 1099?
Form 1099 is a family of documents used by the Internal Revenue Service (IRS) to track different types of non-employee income. If you paid someone who is not on your payroll, such as a freelancer or contractor, or if you received income outside of a regular job, you may be required to file or receive a 1099.
Think of it this way: W-2 forms report income from employers to employees, while 1099 forms report income that comes from business transactions, investments, or freelance work.
There are several types of 1099 forms, but the most common ones include:
- 1099-NEC: For reporting payments to independent contractors and freelancers.
- 1099-MISC: For reporting miscellaneous income such as rent, royalties, or prizes.
- 1099-INT: For interest income from bank accounts or loans.
- 1099-DIV: For dividend income from investments.
- 1099-K: For payments processed through platforms like PayPal or Stripe.
If you are running a U.S. business, the 1099-NEC and 1099-MISC are the ones you are most likely to deal with.
Who Needs to File a 1099?
You are required to file Form 1099-NEC if you paid $600 or more during the year to a person or unincorporated business (such as a sole proprietor or single-member LLC) for services performed for your company.
This includes payments for:
- Freelance work
- Graphic design or marketing services
- Virtual assistants or consultants
- Accounting or legal support (if not incorporated)
- Commission or referral payments
If you hired contractors through your U.S. entity, the IRS wants to know how much you paid them, and your contractors also need that information to report their income correctly.
Even if your contractor is based outside the United States, there are still cases where the IRS expects reporting. This depends on whether the income is U.S.-sourced and whether there are tax treaties in place between the U.S. and the contractor’s country.
For international founders running a U.S. LLC, this can be confusing, which is why Bookmate helps determine when a 1099 is required and ensures it is filed properly.
Who Does Not Need to File a 1099?
You do not need to file a 1099 in the following cases:
- You paid a corporation, including an S-Corp or C-Corp (except in special cases like legal services).
- You paid less than $600 to a contractor during the tax year.
- You paid for goods or products, not services.
- You made personal payments, unrelated to your business.
- You are paying someone who is not a U.S. person and performed the work entirely outside the U.S.
However, determining whether a payment is “U.S.-sourced” can be tricky, and mistakes are common. Many founders incorrectly assume they never have to issue a 1099 to foreign contractors, but this depends on the nature of the work and where it is performed.
That is where professional guidance makes a big difference. Bookmate helps clients identify exactly when a 1099 or alternative reporting form (like Form 1042-S) applies.
Why 1099 Filing Matters
The IRS uses 1099s to make sure income is being properly reported and taxed. If you fail to issue required 1099s, your business could face penalties.
Some key reasons 1099 filing is important:
- Avoid IRS penalties – Missing or late 1099 filings can lead to fines ranging from $60 to $310 per form, depending on how late you file.
- Maintain compliance – Proper filings show that your business is transparent and reliable, which matters for audits, banking, and future investors.
- Build trust with contractors – Contractors depend on their 1099s to report income accurately and stay compliant themselves.
Protect your business records – Issuing 1099s ensures your bookkeeping stays aligned with IRS standards, making annual filings much easier.
When to File Form 1099
The deadline to issue 1099-NEC forms to contractors and file them with the IRS is January 31st each year for the prior tax year’s payments.
For example, if you paid a contractor in 2024, you must file and send the 1099 by January 31, 2025.
If you file electronically, the IRS system (known as FIRE or e-file) will accept submissions through the first few months of the year, but penalties begin accumulating immediately after the January deadline.
If you are a Bookmate client, we can take care of preparing and filing these forms on time if you make it part of your tax filing package, so you do not need to track multiple deadlines.
Common Mistakes with 1099s
Even experienced business owners make errors with 1099s. Some of the most common mistakes include:
- Not collecting a W-9 from the contractor before making payments.
- Issuing a 1099 to a corporation when it is not required.
- Failing to issue a 1099 because the contractor was paid through PayPal or Stripe.
- Misclassifying a worker as an independent contractor when they should be an employee.
- Forgetting to include payments made in cryptocurrency, which also count as reportable income.
To avoid these mistakes, it is best to have clear onboarding steps for every new contractor. At Bookmate, we help clients create streamlined processes that include requesting W-9 forms and tracking all payments made throughout the year.
1099s and Cryptocurrency Payments
With the rise of cryptocurrency payments, 1099 reporting is becoming even more complex. The IRS now requires exchanges and businesses to report crypto payments in many cases, and these are treated as property transactions rather than cash payments.
If your company pays contractors or receives income in cryptocurrency, special reporting rules apply. The value of the crypto at the time of payment must be recorded in U.S. dollars, and both sides of the transaction may need to report it.
Bookmate’s accounting team is experienced with crypto-related filings and ensures your records meet IRS expectations.
How Bookmate Can Help
If you are unsure whether you need to file a 1099, you are not alone. Most founders are focused on running their businesses, not decoding IRS forms. That is where Bookmate comes in.
We help digital founders and global entrepreneurs:
- Determine if 1099s are required for their contractors.
- Prepare and file 1099-NEC and 1099-MISC forms accurately and on time.
- Handle W-9 collection and verification.
- Keep your bookkeeping aligned with IRS compliance standards.
We handle 1099 filings if necessary, as part of your broader compliance and tax package, so you never have to worry about missing a deadline or paying unnecessary penalties.
Final Thoughts
Form 1099 may seem like a small detail in your annual filings, but it plays a big role in keeping your U.S. business compliant. Whether you are paying freelancers, earning from multiple income streams, or managing international contractors, understanding your reporting responsibilities is key.
At Bookmate, our mission is to make compliance simple and stress-free for digital entrepreneurs. We guide you through each step, from bookkeeping to 1099 filings, with clarity and precision.
If you want help managing your filings or understanding when 1099s apply to your business, we are here for you.
Visit www.trybookmate.co to learn more or book a consultation here to speak directly with our team.
