Emily Clarke

What are 1099 Workers?

When running a business, the usual way of getting others to perform work for you is to hire employees. Under this type of arrangement, employees work for your company for a set number of hours per week, and you pay each person a wage that you both agree to before the worker is hired. The worker generally expects to work a minimum number of hours per week or month, and employees do not usually work on a per-project basis.

Although this type of arrangement works for many businesses, there may be times when you don't need to hire someone to be a permanent part of your team, but you still need them to perform work. In these scenarios, you can look into hiring contract workers, also sometimes referred to as 1099 workers.

Why Are They Called 1099 Workers?

1099 workers carry that moniker due to the name of the Internal Revenue Service (IRS) form employers send to contractors for tax purposes. A 1099 form is used to list payouts for contract workers, and while there are a variety of sub-categories for 1099 forms, the catchall "1099" is often used to describe a form that is filed with the IRS to report funds paid to contract workers.

How Do Employers Pay Contractors?

When you make payouts for contracts, you need to track these as business expenses in most cases. If you aren't keeping up with your payouts for contracts, the IRS will assume all revenue your business received counts as income, despite the fact that you end up paying money to your contractors. Exact payouts for contracts made easy! Click here to streamline your financial transactions now.

At the end of the year, you will also need to issue a 1099 form to any contractors who have earned above a specific threshold from your business. In 2024, this threshold is $5,000, but it's always a good idea to consult with a tax attorney or certified public accountant to know about current regulations that affect your business.

Disclaimer: The above is not tax advice. Always consult a tax professional regarding matters related to business income, payouts and taxes.

Author Resource:-

Emily Clarke writes about multiple payment platforms, payouts API, marketplace payouts and more. You can find her thoughts at API tools blog.