W-9s, 1099s, and Paying US Freelance Developers: What You Need to Know

Nobody starts a company thinking about tax forms. Then January rolls around and you realize you paid a developer $15,000 last year and have no idea what paperwork you need.

We've been there. Multiple times. Here's what we've learned about the W-9 and 1099 situation so you don't have to figure it out the hard way.

The W-9 is just their info

A W-9 is not a tax filing. It's a form where your contractor gives you their legal name, address, and tax ID (Social Security Number or EIN). You need this information to file their 1099 later.

Collect it before you pay them anything. Seriously. Chasing a contractor for their W-9 in January when they've moved on to other projects is painful. Get it upfront, save yourself the headache.

The form is one page. They fill it out, sign it, send it back. Keep it on file. That's it.

The 1099 is what you file

If you paid a US contractor $600 or more during the year, you need to send them a 1099-NEC by January 31st. You also file a copy with the IRS.

The form reports how much you paid them. It doesn't mean you withheld taxes or anything like that. You're just telling the IRS "we paid this person this much." The contractor is responsible for paying their own taxes on it.

The $600 threshold is cumulative. Ten payments of $80 each? That's $800. You need to file. One payment of $500? You're under the threshold, no 1099 required.

What happens if you don't

Let's be real. Plenty of companies don't file 1099s and nothing happens. The IRS has bigger fish to fry than your $3,000 payment to a freelancer.

But if you get audited, missing 1099s look bad. There are penalties, technically $50-280 per form depending on how late you are. More importantly, it suggests sloppy record-keeping, which makes auditors dig deeper.

Just do it. It's not hard once you have the W-9s. Most payroll software or your accountant can file them in bulk.

International contractors are different

If your contractor isn't a US person, you don't file a 1099. Instead, you collect a W-8BEN form from them. This certifies they're foreign and not subject to US tax withholding.

Same rule as the W-9: collect it before you pay them. The form expires every three years, so if you're working with someone long-term, you'll need to get a new one eventually.

No 1099 filing required for foreign contractors. Just keep the W-8BEN on file to prove you did your due diligence.

The stuff that trips people up

LLCs and corporations are weird. If you pay an LLC, you might need to file a 1099, or you might not. It depends on how they're taxed. Single-member LLCs taxed as sole proprietors? 1099. S-corps and C-corps? No 1099 required. Ask for their W-9, which will tell you their entity type.

Payment method doesn't matter. Doesn't matter if you paid via PayPal, Wise, check, or crypto. If you paid a US person over $600, you file the 1099.

State requirements exist too. California, New Jersey, and some other states have their own filing requirements. If you have contractors in those states, check the local rules or ask your accountant.

Making it automatic

The key is collecting W-9s at the start, not scrambling in January. Build it into your onboarding. Before any money moves, you have their tax form on file.

Grade handles this. When you add someone, they fill out their tax info as part of setup. US contractors submit W-9s, international ones submit W-8BENs. Everything's stored and ready when tax season comes. You're not chasing anyone.

We also track payment totals automatically. At year end, you can see exactly who crossed the $600 threshold and needs a 1099. No spreadsheet reconciliation.

The short version

Collect W-9s from US contractors before paying them. Collect W-8BENs from international contractors.

If you paid a US contractor $600 or more, send them a 1099-NEC by January 31st.

International contractors don't get 1099s.

This isn't the exciting part of running a company. But getting it right takes an hour of setup and saves you a week of panic every January. Worth it.