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The Best Way to Handle Subcontractor Payments and 1099s

Paying subcontractors is a normal part of doing business in industries like construction, landscaping, and trades—but managing those payments correctly is crucial for staying compliant and audit-ready.

At Bluestone Bookkeeping & Consulting, we help clients create systems that make handling subcontractor payments and preparing 1099s smooth and stress-free. Here’s what you need to know.

Why It Matters
Improper handling of subcontractor payments can trigger IRS penalties or cause problems during insurance audits. If you pay an individual or business $600 or more during the year and they aren’t an employee, you’ll likely need to send them a 1099-NEC.

Best Practices for Subcontractor Payments:

1. Collect a W-9 Upfront
Before issuing the first payment, request a completed W-9 form. This ensures you have the correct legal name, tax classification, and EIN or SSN.

2. Track Payments Accurately
Use bookkeeping software to tag subcontractor payments correctly. Avoid paying contractors via apps like Venmo or Zelle, which can make tracking and reporting more difficult.

3. Avoid Paying in Cash
Cash payments are hard to document and can cause reporting issues. Always pay through traceable methods like check or ACH.

4. Reconcile 1099 Totals Before Year-End
Review subcontractor totals before December to catch any discrepancies early. It’s easier to fix issues now than scramble in January.

5. File on Time
1099 forms must be sent to contractors and the IRS by January 31. Partnering with a bookkeeper ensures forms are filed correctly and on time.

We Make It Simple
Bluestone Bookkeeping & Consulting helps small business owners handle subcontractor payments with confidence. From setup to year-end filing, we’ve got you covered.Need help preparing 1099s? Let us take care of it for you so you can avoid costly errors and stay compliant.

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