Distribute 1099-NEC forms to your contractors
This article is for admins who need to distribute Form 1099-NEC to contractors.
Each year, you need to give contractors their Form 1099-NEC by January 31 (unless the date falls on a weekend). For 2025, you need to distribute forms by February 2.
We file the forms with the Internal Revenue Service (IRS) and notify contractors when their copies are ready in their Gusto accounts.
Choose how to distribute 1099-NEC forms
You can choose how to deliver copies of Form 1099-NEC to your contractors:
Have Gusto mail them: Place your order by January 23 so we can postmark forms by February 2.
Mail them yourself: Download and print copies to send by mail.
Download the employer packet: Print and hand out forms in person if needed.
Deliver electronically: You can send forms electronically if your contractor gives consent.
No matter which option you choose, we’ll email contractors to let them know they can also access their form in their Gusto account.
Know before you distribute 1099-NEC forms
Filing threshold: We file 1099-NECs for contractors with payments reported in Gusto, regardless of the $2,000 threshold. This helps contractors get the forms they need to file their taxes quickly and correctly.
Learn more in the FAQs section of the article.
Check for accuracy: Always verify information before giving out forms. If you spot errors, follow our 1099-NEC correction steps or contact us. To contact us, sign in to your Gusto account and click the help icon
in the top-right corner of the page.Historical payments: If you paid a contractor outside of Gusto and need a 1099, follow these steps.
End-of-year deadlines apply. You cannot generate an original 1099 if you did not report the historical payments before the deadline.
Agency filings: We send all required federal, state, and local copies of 1099-NECs directly to tax agencies.
Form 1096: You only need this cover sheet if you mail paper copies to the IRS. Since we file electronically, we do not file Form 1096.
Paper stock: You do not need special paper to print and distribute 1099 forms.
Help for others
Contractors: If contractors need help accessing their 1099s, share this article with them.
Accountants: If accountants need all client form packages, go to this article to learn how to get them.
When you pay contractors for work, you may need to file a 1099-NEC form. This ensures compliance with IRS rules and helps contractors report their income.
When you need to file
This applies to most contract work, like consulting, cleaning, or repairs.
File a 1099-NEC if you pay a contractor $600 or more in a calendar year.
Starting in 2026 (forms filed January 2027), the threshold increases to $2,000
Always give a copy to the contractor and file with the IRS.
Key takeaway: If you pay $600 or more for services, you typically must file.
Who gets a 1099-NEC
You must file for:
Individuals (sole proprietors)
Partnerships
LLCs taxed as individuals or partnerships
Attorneys (even if they are a corporation)
Medical and healthcare providers
You do not need to file for:
C-corporations
S-corporations
What payment to report
Report:
Services (work done for your business)
Commissions
Fees
Prizes or awards for services
Do not report:
Goods or products
Payments to corporations (unless its for attorneys or healthcare)
Filing deadlines
Give contractors their 2025 1099-NEC by February 2nd.
File with the IRS by February 2nd—Gusto files 1099s on your behalf.
State rules
Most states follow the federal $600 rule. Some states (like Vermont) may require a 1099-NEC for any amount if you withhold state tax.
Always confirm your state’s rules—contact the state directly if needed.
Payments less than $600
You do not have to file for payments under $600.
You can still file if you want to help contractors prove their income and keep records clean.
Summary table
Who gets a 1099-NEC?
When to file?
What to report?
Individuals, partnerships, LLCs (not taxed as corps)
$600+ in a year
Services, fees, commissions, prizes, awards
Corporations (except attorneys/healthcare)
Not required
Not required
Attorneys (even if a corp)
$600+
Legal services
Less than $600
Not required (but you can still file)
Optional filing
We can mail your Forms 1099-NEC and corrected Forms 1099-NEC (if applicable) directly to your contractors for $5 per person. We’ll add mailing fees to your monthly invoice.
Important: You can only request that we mail 1099 forms once per tax season, so make sure to select all contractors who need their forms mailed. Once you place the order, you cannot cancel it. To meet the February 2 IRS deadline for 2025 forms, submit your order in Gusto by January 23.
To have Gusto mail forms to one or more of your team members:
Go to Taxes & Compliance.
Select Tax documents.
Click the 1099s tab.
Click Distribute 202X 1099s button.
This button becomes available once the form packages are final. It will not be available when forms are still drafts.
Select I’d like Gusto to mail them to my employees.
Click Continue.
Review how it works and agree to the terms for sending forms.
Click Continue.
Select all contractors whose forms you want Gusto to mail. You can only place one 1099 order, so you’ll need to distribute forms to contractors you do not select (unless they’ve agreed to go paperless). You can select to:
Only mail to people who have not requested electronic-only copies (recommended)
Mail to everyone
Individually select people to mail forms to
Click Save and continue.
Complete any remaining pages or prompts. These will vary based on your selection above.
Review the order summary and total cost.
Click Submit order.
We’ll send all original and corrected Forms 1099-NEC. This includes any corrected forms generated after the original.
Download a mail-friendly packet of all your contractors’ Forms 1099. This packet does not include the employer copy of Forms 1099. Learn how to download a complete packet that includes the employer copy for records.
To download, print, and mail 1099-NEC forms yourself:
Go to Taxes & Compliance.
Select Tax documents.
Click the 1099s tab.
Click Distribute 202X 1099s button.
This button will only be available once the form packages are final. It will not be available when forms are still drafts.
Click I’d like to download and distribute them on my own.
Review how to build your tax form packet and click Continue.
Select all employees whose forms you want included in the mailable packet.
We’ll email you when your packet is ready to download. You’ll find it on your Documents page in a new row. You can also try refreshing this page in a few minutes. Once it’s ready, you’ll see a link to download on the right.
When it’s ready, click the download icon and print your contractors’ Forms 1099.
Print your contractors’ 1099s on standard white printer paper (8.5” x 11”).
Put all three forms per contractor in each envelope.
Envelope tip: For your convenience, we suggest using standard double-window 1099 envelopes (often referred to as style 7777-2). The windows align with the payer and recipient address information on the printed forms. You can also use any standard business envelope as long as you address it correctly.
Mail the Forms 1099 to your contractors by January 31.
If you need more time, find the IRS extension request instructions here.
Get a PDF bundle for all contractors’ Form 1099s, including employer copies. You can hand them out in person if needed.
To download the annual employer packet:
Go to Taxes & Compliance.
Select Tax documents.
Click the 1099s tab.
Click the Download 1099s button.
Select the year.
Click Download.
If you need to distribute any, print the Forms 1099 for contractors.
Print the forms on standard white printer paper (8.5” X 11”).
Put all three forms per contractor in each envelope.
Envelope tip: We recommend using standard double-window 1099 envelopes (style 7777-2). These make sure the names and addresses show through the windows in the right spots. You can also use a regular business envelope, as long as the address is correct and easy to read.
Distribute the Forms 1099 to your contractors by February 2.
If you need more time, find the IRS extension request instructions here.
If only a few of your contractors need paper 1099s, you can also download individual Form 1099s from their profile:
Go to People.
Click your contractor’s name.
Click the Documents tab.
Under Employment Documents, click 1099-NEC: 202X for the applicable year.
We make final forms available in mid-to-late January.
Download, print, and distribute the Forms 1099 to contractors.
Print your contractor’s 1099 on standard white printer paper (8.5” X 11”).
You’re required to distribute paper copies of your contractors’ 1099s unless they’ve given consent for electronic distribution.
Forms are available to distribute by mid-January, and you need to distribute the 2025 forms by February 2.
To check who has given consent for electronic distribution in Gusto:
Go to Taxes & Compliance.
Select Tax documents.
Click the 1099s tab.
You’ll find a list of each teammate, with a column showing their delivery preference. This information becomes available once final forms are available in Gusto.
Note: Since you’re required to provide paper copies, we’ll set their preference as “paper copy” by default if they have not chosen one yet. Contractors who want to go paperless must update their delivery preference by January 15 (before forms become available) to take effect for 2025 tax documents.
The 1099 filing status—draft or already filed—determines the next steps needed.
Go to a different article to learn the next steps: How to correct a Form 1099-NEC or stop a filing.
Gusto files Form 1099-NEC with the IRS and any required states for all U.S. contractors paid through Gusto in the calendar year.
We report all contractor earnings in Box 1 as non-employee compensation.
Reminders
Contractors can view their 1099 in Gusto by late January.
We file Form 1099-NEC even below the $2,000 threshold so contractors can file taxes quickly and accurately.
If you're an admin and do not want us to file a 1099-NEC for someone, update your Gusto account and let us know to stop the filing.
What Gusto does not support
Gusto does not currently support the items below. If they apply, they must be handled outside Gusto.
Local 1099-NEC filings
We do not file 1099-NEC forms to local tax agencies.
Contractor tax withholding
We do not support backup withholding for contractors.
We do not support state-required withholding for nonresident or higher-paid contractors. Some states require employers to withhold when paying nonresident or certain independent contractors:
California: Withhold 7% of gross payments when paying a nonresident more than $1,500 in a year for services in CA.
North Carolina: Withhold 4% when paying a nonresident more than $1,500 in a year.
Indiana: Withhold 1.2% on services and 0.3% on materials when paying a nonresident more than $1,000 in a year.
Minnesota: Withhold 8% (or 9.85% if no SSN) when paying self-employed nonresident earns at least $50,000 for construction work.
Pennsylvania: Withhold on payments over $5,000 in a year for services in PA. Withholding is optional below $5,000.
New Jersey: Withhold 7% from payments to independent construction contractors.
South Carolina: Withhold 2% on contracts over $10,000 with nonresidents, unless they're registered and give proof.
Non-US contractor (international) withholding or reporting
We do not support this in Gusto.
Excess golden parachute payments
We do not support reporting golden parachute payments on Form 1099-NEC. The IRS requires these to be reported in box 3 of Form 1099-NEC. Talk to a tax professional to report these payments. You can also find one in our partner directory.
If any of the above apply, the contracted business should provide you with the necessary documentation.
Box descriptions for Form 1099-NEC
Below are simplified summaries of how Gusto fills out (or does not fill out) each box—learn more in the detailed IRS guidelines for filling out Form 1099-NEC.
Keep in mind: Gusto reports all earnings as non-employee compensation in Box 1 of the 1099-NEC we’ve prepared.
Box 1: Non-employee compensation—this includes all compensation paid to the contractor, such as fees, commissions, prizes, and awards for services performed. As a reminder, Gusto reports all non-employee compensation in this box, regardless of the $2,000 IRS reporting threshold.
Box 2: Gusto does not currently support this, so the box will be left blank.
Box 3: Gusto does not currently support this, so the box will be left blank.
Box 4: Federal income tax withheld during the year—Gusto does not currently support this, so the box will be left blank.
Box 5: State tax withheld during the year—Gusto does not currently support this, so the box will be left blank.
Box 6: The state abbreviation and state withholding account number (if applicable) of the company that's paying and using the services of a contractor. This would only need to be reported if state income tax was withheld.
Gusto will list the applicable state abbreviation(s).
Box 7: State income paid to the contractor for the year.
Contractor tips and new tax deductions (2025)
Starting in tax year 2025, a new tax rule allows independent contractors to deduct up to $25,000 in qualified tips from their gross income. This change may lower income taxes for contractors who earn tips.
Important: We do not collect or track tip income for contractors. If a contractor earned tips in 2025, they must report this information themselves when filing taxes.
Step 1: Check if the tips qualify
Before using this deduction, confirm the tips meet the IRS rules.
Tips are considered qualified tips only if they:
Are voluntarily given by customers or clients
Have no penalty if a customer does not tip
Are set by the customer, not the business
Come from work in an approved tipped occupation. See the Treasury’s list of approved occupations.
Step 2: Gather the right information
For tax year 2025, companies were not required to track or report contractor tips.
When preparing personal contractor taxes, contractors may need:
A record of the qualified tips earned in 2025
The Treasury Tipped Occupation Code (TTOC) for the job
Important tax reminder
Even if some tips can be deducted for income tax, contractors may still owe self-employment tax on those tips.
Learn more
To see other tax changes from the One Big Beautiful Bill, check out our related Help Center article.
Starting in tax year 2025, a new tax rule lets independent contractors deduct up to $25,000 in qualified tips from their gross income. This change may lower taxes for contractors who earn tips.
How contractor tips are reported in 2025
For tax year 2025:
Companies were not required to track or report contractor tips.
We did not collect tip information for contractors.
Tip amounts are not included on contractor 1099-NEC forms.
What contractors need to prepare their taxes
When your contractors file their 2025 taxes, they may need:
A record of the qualified tips they earned in 2025
Confirmation that tip amounts are included in total payments reported to Gusto
The correct Treasury Tipped Occupation Code (TTOC) for their job
How we help contractors
We include this information in a Help Center article for contractors. Contractors can access the article through the link in their 1099-NEC email notification.
Additional details and next steps
1. Understand 1099-NEC changes under the One Big Beautiful Bill Act (OBBA)
Starting in 2026, the reporting threshold for 1099-NEC forms will increase:
You’ll only need to file a 1099-NEC if you paid a contractor $2,000 or more in a year.
The previous limit was $600.
You can still file for smaller amounts:
We’ll continue to create and file 1099-NEC forms for all contractors by default.
To opt out of sending a 1099 for certain contractors, use the instructions in this article.
You might still choose to file below $2,000 if:
A state requires it
Your contractor requests it
You want consistent records
2. Reporting tips for contractors in 2025
Since we did not track contractor tips in 2025, you need to share tip information with your contractors directly.
To report contractor tips for 2025:
Ask contractors to share their tip records.
Create a statement or letter for each contractor detailing their total qualified tips. You can use this example email template as a starting point.
Send that information by February 2, 2026.
Provide the Treasury Tipped Occupation Code (TTOC) from the official Treasury list.
3. Keep records and understand penalty relief
If you did not keep detailed tip records in 2025:
The IRS issued Notice 2025-62, which offers penalty relief for missing or incorrect tip reporting for tax year 2025 only.
Starting in 2026, you must keep clear records of all employee and contractor tips.
4. Share key tip deduction details with your contractors
While contractors will get their 1099-NEC as usual, you can remind them of these key points:
The deduction limit is $25,000 per tax return ($25,000 for joint returns).
The deduction applies from 2025 through 2028.
It phases out for those earning above $150,000 ($300,000 for joint filers).
Contractors must have a valid Social Security number (SSN) and work in a qualified tipped occupation.
Even if tips are deductible, self-employment taxes still apply.
They should consult a tax advisor to confirm eligibility.
FAQs
Q: What if my contractor earned less than $2,000 in 2025?
A: You can still send a 1099-NEC and tip statement. It’s good practice and may be required by some states.
Q: Do I report contractor tips through Gusto?
A: No. We did not collect contractor tip data in 2025. You need to handle tip tracking and reporting yourself.
To make sure contractors can claim the new tax deduction, include their tips in their total earnings on their 1099. You can do this by adding a historical payment in Gusto that includes any past payments or tips you have not already entered.
Q: Where can I find the Treasury Tipped Occupation Code (TTOC)?
A: The U.S. Treasury published a list of approved occupations here.
Q: What happens if I do not report tips for 2025?
A: For 2025, the IRS is offering penalty relief under Notice 2025-62. Starting in 2026, all tip reporting requirements will apply.
Q: Will Gusto update this process for 2026?
A: Yes. Once the IRS and Treasury finalize 2026 guidance, we’ll update this article and all related forms.