An independent contractor who performs services without being classified as an employee. Businesses pay 1099 contractors without withholding payroll taxes and must file Form 1099-NEC for payments of $600 or more.
Why 1099 Contractor matters for employers
Businesses must determine each year whether any individual or entity they paid $600 or more qualifies for a 1099-NEC. This requires having a valid Form W-9 on file for each vendor before payment. Payments to corporations (other than attorneys and medical providers) are generally exempt from 1099 reporting, but LLCs taxed as sole proprietors or partnerships require a 1099-NEC.
Failing to file required 1099-NECs results in penalties of $60-$310 per form depending on how late the filing occurs. Intentional disregard results in a minimum $630 penalty per form. Backup withholding at 24% applies to payments made without a valid W-9 or for payees with IRS B-Notices. BEG tracks contractor payments and manages 1099-NEC production as part of managed payroll.
How BEG handles 1099 Contractor for clients
BEG Managed Payroll handles 1099 Contractor as part of a fully managed payroll service at $25-$45 per employee per month. Clients do not need to track compliance rules, filing deadlines, or calculation methods related to 1099 Contractor on their own. Everything is included. Learn about BEG Managed Payroll.
Frequently asked questions
Do employers have to manage 1099 Contractor themselves?
No. A managed payroll provider handles 1099 Contractor as part of full-service payroll. BEG manages this for clients at $25-$45 PEPM with no system migration required.
What happens if 1099 Contractor is handled incorrectly?
Errors related to 1099 Contractor can trigger IRS penalties, state agency assessments, or employee disputes. Catching and correcting errors before filing is far less costly than after-the-fact corrections.
How does BEG handle 1099 Contractor for managed payroll clients?
BEG tracks, calculates, and remits everything related to 1099 Contractor as part of fully managed payroll. Clients do not need to monitor compliance -- that is included in the service at $25-$45 PEPM.
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About the author
Anthony Moretti is VP of Sales at Business Executive Group, where he builds BEG's managed payroll and HR service verticals for employers across Dallas-Fort Worth and nationwide. He writes the BEG Payroll Glossary to give employers plain-English answers on payroll and compliance.
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