Independent Contractors: How to Report Your Requirements | 2025 Tax Season

Let's take a look at how to properly report your tax requirements as an independent contractor and the exceptions that may exist.

What is an Independent Contractor:

    An independent contractor is a person or business that provides goods, labor, or services to another individual or organization. An independent contractor reports their income and expenses on Schedule C of their personal Form 1040.  The question we often address is when a person is operating as an LLC.  Operating as an LLC does NOT make you exempt from the filing requirement.  An LLC is not the same, for tax purposes, as a corporation.  An LLC can be taxed as an individual, partnership, or corporation and only LLC’s that are operating and filing separate corporate returns are exempt.   

How to report:

     To report payments to an independent contractor, the business making the payments will issue a Form 1099 to the independent contractor and the IRS. Two forms of 1099 can be filed depending on the type of payment that was made.  Rental and other payments are reported Using Form 1099 MISC, and contractor payments are reported on Form 1099-NEC.  Form 1099’s should be mailed to the payee by January 31, 2025, and to the IRS by February 28, 2025.  The person receiving the payment is then required to fill out a Form W-9, preferably before the payment is issued, showing their name, address, and social security number.  If you are operating as an LLC and have a Federal Identification Number (FEIN), then the FEIN can be used in lieu of the Social Security number.

The Exception:

     Independent contractors who operate as a full corporation are EXEMPT from filing the 1099. Any payments to an attorney REQUIRE a Form 1099 without any exceptions.