1099 Filing for Construction Subcontractors

Contractors who pay subcontractors generally must report those payments to the IRS on Form 1099-NEC. The reporting itself is straightforward. The two things that go wrong are missing W-9s discovered in January, and treating a worker as a subcontractor when the relationship is actually employment.

Key Takeaways

The IRS says Form 1099-NEC is generally used for payments of $600 or more for services in the course of business.
Collect the W-9 before the first payment, not at year end. This is the single highest-leverage habit in subcontractor management.
Payments made by credit card or third-party network are reported by the processor, not by you.
Worker misclassification is a separate and more expensive problem than a late 1099.
Filing deadlines for 1099-NEC fall at the end of January.

When Does a Subcontractor Need a 1099-NEC?

Per the IRS instructions for Form 1099-NEC, you generally file for each person to whom you paid at least $600 during the year for services performed in the course of your trade or business, where the payee is not your employee.

Common construction cases that do require a 1099-NEC: an unincorporated trade sub, an independent operator, an individual paid by check or ACH. Common cases that do not: payments to a corporation (with limited exceptions), payments for merchandise only, and payments made via credit card or a third-party settlement organization, which those processors report instead.

Why the W-9 Has to Come First

The W-9 gives you the legal name, address, taxpayer identification number, and entity type. Without it you cannot file correctly, and chasing a sub for a TIN in January – after the job is done and the relationship has cooled – is a predictable and avoidable annual crisis.

The practical rule: no W-9, no first check. It takes one minute at onboarding and removes the entire problem.

Subcontractor or Employee?

This is the question that carries real exposure, and construction gets scrutiny because the pattern is common. The IRS looks at behavioral control, financial control, and the type of relationship between the parties. No single factor decides it.

Issuing a 1099 does not make someone a contractor. If the working relationship looks like employment – you set the hours, direct the method, supply the tools, and it is ongoing and exclusive – then the correct treatment is payroll, and the 1099 is papering over a misclassification. State agencies frequently apply their own, stricter tests.

We flag relationships that look misclassified. We are bookkeepers, not attorneys, and a genuinely contested classification is a question for your CPA or employment counsel.

What We Handle

W-9 collection and tracking at vendor onboarding
Vendor setup in QuickBooks with correct 1099 flags and entity types
Payment method tracking so card and third-party payments are excluded correctly
Year-end 1099-NEC preparation, filing, and recipient copies
Cleanup of vendor lists with missing or mismatched TINs
Flagging worker relationships that appear misclassified, for review with your CPA

Frequently Asked Questions About Subcontractor 1099s

When does a construction subcontractor need a 1099-NEC?

The IRS says Form 1099-NEC is generally used to report payments of $600 or more for services performed in the course of your trade or business by someone who is not your employee. Payments to corporations are generally excluded, with limited exceptions.

Do I file a 1099 if I paid the sub by credit card?

No. Payments made by credit card, debit card, or through a third-party settlement organization are reported by the payment processor, not by you. Including them on your own 1099-NEC would double-report the income.

What if a subcontractor will not give me a W-9?

Stop paying until you have it. That is the only reliable leverage. If the relationship is already past that point, the IRS provides backup withholding procedures, and you should raise it with your CPA before the filing deadline rather than after.

Is a subcontractor with an LLC exempt from 1099 reporting?

Not automatically. It depends on how the LLC is taxed. A single-member LLC treated as a disregarded entity is generally reportable; an LLC that has elected corporate taxation generally is not. The W-9 captures exactly this, which is another reason to collect it up front.

When are 1099-NEC forms due?

Form 1099-NEC is due to both the recipient and the IRS at the end of January. Confirm the exact date each year, since it shifts when it falls on a weekend.

Can issuing a 1099 protect me if the worker was really an employee?

No. Classification is determined by the substance of the working relationship, not by the form you file. The IRS examines behavioral control, financial control, and the type of relationship. If the facts indicate employment, the 1099 does not change that.

Stop Chasing W-9s in January

Subcontractor reporting is a process problem, not a January problem. Set it up correctly at onboarding and year end becomes uneventful.