Bookkeeping Questions: What about Taxes, Contractor Payments and 1099s?
A practical guide for business owners who want to stay compliant without drowning in paperwork.
Running a business comes with plenty of challenges—compliance shouldn’t be one of them. This guide breaks down how to handle quarterly estimated taxes, track contractor payments, and issue 1099s so you can focus on growing your business without fear of IRS penalties.
Follow what we have detailed below on how to best deal with all of it!
1. Quarterly Estimated Taxes: What You Need to Know
If you’re self-employed or running a small business, you likely need to pay estimated taxes four times a year. These payments cover your income tax and self-employment tax obligations.
Key Dates to Remember:
Q1: April 15
Q2: June 15
Q3: September 15
Q4: January 15 (of the following year)
How to Calculate Your Payments:
Use IRS Form 1040-ES.
Estimate your annual income, deductions, and credits.
Divide your total estimated tax by four to get your quarterly amount.
Pro Tip: Use accounting software or hire a bookkeeper to project your income and track payments. Consistency avoids underpayment penalties.
2. Tracking Contractor Payments
If you hire freelancers or independent contractors (not employees), it’s your responsibility to track how much you pay each one throughout the year.
Best Practices:
Collect a completed Form W-9 before work begins.
Use a reliable bookkeeping system to log every payment (e.g., QuickBooks, Wave, or Bench).
Categorize contractor payments clearly to separate them from employee wages.
Tip: Set up a dedicated ‘Contractor Payments’ category in your chart of accounts.
3. Issuing 1099s: Don’t Miss the Deadline
If you paid any contractor $600 or more in a calendar year, you must send them a Form 1099-NEC.
What to Include:
Contractor’s name, address, and taxpayer ID (from their W-9).
Total amount paid during the year.
Your business info (name, address, EIN).
Deadlines:
To contractors: January 31
To IRS (paper): February 28
To IRS (e-file): March 31
Filing Options:
Use the IRS FIRE system, third-party filing services (like Track1099, Tax1099), or a payroll platform that includes contractor management.
4. Avoiding Common Penalties
Here’s how to stay penalty-free:
Pay quarterly taxes on time and in full.
File 1099s accurately and on schedule.
Don’t misclassify workers (contractor vs. employee).
Keep complete, organized records.
Extra Help: If you’re unsure, work with a CPA or enrolled agent familiar with small business tax compliance.
Unlock the Power of Bookkeeping – Start Today
Don’t leave your financial growth to chance. Compliance doesn’t have to be a headache. By following these steps and keeping your records in order, you can manage your taxes and contractor obligations with confidence. A little preparation each quarter beats a lot of stress in tax season.
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