When you pay a contractor $600 or more in a year, the IRS wants to know. You do this by sending a 1099-NEC form to your contractor and filing one with the IRS by January 31st.
Why is this good for you? Because filing 1099s means those payments are documented as business expenses, which lowers your taxable income. Plus, it protects you from IRS fines for missing filings.
Common mistake: Forgetting to file or not reporting what you paid contractors, so it looks like you earned all the money yourself. For example, say you’re a photographer with a $10,000 project but you paid an editor $3,500 and a second shooter $1,000.
If you skip filing 1099s or tracking these payments, your taxes will be higher because the IRS thinks you earned the full $10,000 without expenses.
Filing 1099-NEC forms properly lowers your taxes and keeps you compliant.