A Guide to Managing 1099 Contractors in Your Consulting Business
As your consulting business grows, hiring independent contractors can help you scale without the commitment of full-time employees. But working with 1099 contractors comes with its own set of responsibilities—especially when it comes to compliance and bookkeeping.
This guide will walk you through the essential steps to managing 1099 contractors with confidence and clarity.
Understand Who Qualifies as a 1099 Contractor
Before you begin, make sure the person you're hiring actually qualifies as an independent contractor.
Key characteristics of a 1099 contractor:
Controls how and when they work
Uses their own tools and equipment
Can take on other clients
Operates as a separate business entity
Misclassifying an employee as a contractor can lead to hefty penalties. When in doubt, consult a tax professional.
Collect the Right Paperwork Up Front
Before any work begins, gather the required forms:
W-9 Form: This includes the contractor’s name, address, and taxpayer identification number (TIN).
Written Agreement: Outline scope of work, deadlines, payment terms, and ownership of deliverables.
This documentation protects you both and keeps your records clean.
Track Payments Accurately in QuickBooks
Use the “Vendor” section in QuickBooks Online to track contractor payments.
Assign each contractor their own vendor profile
Categorize payments clearly (i.e., “Contract Labor”)
Tag transactions to specific projects (if applicable)
Pro Tip: If you pay a contractor more than $600 during the year, you'll need to issue a 1099-NEC.
Stay on Top of Deadlines
Here’s a quick snapshot of key dates:
W-9 Collection: Before payment
1099-NEC Filing to IRS: By January 31
Contractor Receives 1099-NEC: Also by January 31
Missing deadlines can result in fines, so it pays to be organized.
Set Expectations for Communication and Deliverables
Independent contractors thrive on clarity. Discuss up front:
Project timelines and milestones
Preferred communication method and frequency
Who they report to (if working within a team)
A simple kickoff call or checklist goes a long way toward building a smooth working relationship.
Use a System to Manage It All
Tools like QuickBooks Online, Gusto, or Bonsai can simplify the whole process:
Automate contractor onboarding
Centralize documents and contracts
Track payments and generate 1099s
Your future self will thank you come tax time.
Bonus Tip: Consult a Bookkeeper Who Specializes in Consultants
Working with a bookkeeper who understands consulting businesses means:
You stay compliant
Your contractors are tracked accurately
Your financials stay clean and audit-ready
Need help managing 1099s? I help consultants simplify their books so they can focus on their work—not their paperwork.
Final Thoughts
Bringing on 1099 contractors can be a game-changer for your consulting business. With a few systems in place, you can stay compliant, pay contractors on time, and keep your books squeaky clean.
Want support managing contractors and streamlining your bookkeeping?
Book a free discovery call today.