Thinking about handling contractor payments and tax forms yourself? Here’s a step-by-step look at what that really involves, the risks you face, and why most freelancers end up needing extra help — even with tools like QuickBooks.
Step 1: Identify Who Qualifies as a Contractor and How Much You Paid Them
Before you start anything, you need to know exactly who you paid $600 or more during the year for services — these people are your contractors. That sounds simple, but if you’ve worked with many freelancers or vendors across different projects, keeping track can get messy fast.
Common challenges:
Forgetting small payments that add up.
Mixing personal and business expenses.
Not having clear records of who got paid what.
Step 2: Collect W-9 Tax Info From Each Contractor
Once you know who qualifies, you need to collect a completed W-9 form from each contractor. This form gives you their legal name, business name (if any), address, and Taxpayer Identification Number (TIN) — basically, everything the IRS requires to report payments properly.
Why this is tricky:
Contractors might not send it back on time, forcing you to chase them down repeatedly.
You must ensure the info is complete and accurate — mistakes here can cause IRS penalties.
Storing this sensitive info safely is critical to protect personal data.
Step 3: Track & Organize All Contractor Payments Accurately
You have to log every payment you made to contractors, categorize it properly, and link it to their tax info. If you miss payments or miscategorize them, your year-end reports won’t add up — and that can trigger IRS audits or fines.
DIY pain points:
Manually updating spreadsheets or accounting software.
Reconciling payments with invoices and bank statements.
Ensuring everything matches contractor tax data.
Step 4: Fill Out 1099-NEC Forms for Each Contractor
Now the paperwork begins. You must complete a 1099-NEC form for every contractor you paid $600 or more. The form requires precise data entry, including:
Your business info (TIN, address).
Contractor’s info from the W-9.
Exact amounts you paid during the year.
What makes this hard:
One small mistake can cause delays or fines.
If you have dozens of contractors, this becomes a massive, time-consuming chore.
Step 5: Send 1099-NEC Copies to Contractors (By Mail or Electronically)
You must provide contractors with their 1099-NEC by January 31st every year. This means printing or electronically sending the forms on time.
Here’s the catch:
Mailing physical forms is expensive and slow.
Electronic delivery requires contractor consent and setup.
Lost or late forms cause headaches and compliance risks.
Step 6: File 1099-NEC Forms with the IRS (By Mail or E-File)
Finally, you must file the 1099-NEC forms with the IRS, also by January 31st. This can be done via mail or electronically (E-File).
DIY hurdles here:
Physical mailing requires specific IRS-approved paper forms — you can’t just print from your computer.
Electronic filing requires software or services that can be costly or complex.
Missing the deadline or filing errors lead to penalties.
The Risks of Managing Contractor Data Manually
Handling all this yourself means juggling lots of sensitive info — names, addresses, Social Security or EIN numbers. Mishandling this data risks:
Privacy breaches: Improper storage or sending via insecure channels can expose personal info.
Loss of paperwork: Paper forms get lost, or digital files get deleted.
Mistakes: Typos, missing info, or missed deadlines cause IRS penalties.
Stress and time drain: Hours spent tracking, calling contractors, printing, mailing, and filing.
Why Popular Tools Like QuickBooks Don’t Fully Solve This
QuickBooks and other accounting apps help you log payments and sometimes generate 1099 forms — but they don’t:
Automatically collect W-9 info from contractors.
Email contractors securely to gather missing info.
Mail or electronically deliver 1099 copies to contractors.
File 1099s with the IRS for you.
This means you still have to handle chasing paperwork, printing or mailing forms, and filing with the IRS manually or via a separate service.
Why WorkMade Makes This Way Easier and Safer
WorkMade automates the entire contractor payment and reporting process:
Automatically identifies contractor payments.
Sends contractors easy-to-use emails to securely enter W-9 info and payment preferences.
Tracks all payments tied to contractor tax records — no manual spreadsheets.
Handles sending 1099 copies to contractors (coming soon).
Will file your 1099-NEC forms with the IRS electronically (coming soon).
No more paper chasing, manual filing, or worrying about missing deadlines. Plus, all sensitive data is encrypted and stored safely.
Bottom Line
DIY contractor reporting is complicated, risky, and time-consuming — even with popular accounting software. If you want to stay compliant, avoid penalties, protect contractor data, and save your sanity, automating this process with WorkMade is the smart move.