January does not invent your workers. Q4 does.
If someone edits your videos, answers the inbox, or shows up at the rental with your spare key, you either have an employee (W-2, payroll tax, maybe unemployment) or an independent contractor (1099-NEC if you paid $600 or more in the usual case). Calling everyone a contractor because Gusto feels heavy is how audits and back payroll show up.
The tax code is built for business owners. It also assumes you label humans correctly. Regular people can run a shop without a HR department. You still don't get to 1099 your only full-time editor to skip Social Security.
Not knowing your numbers is driving without GPS. You can't file 1099s if the vendor list is a notes app.
The difference in practice
The IRS looks at behavioral control, financial control, and the relationship (contracts, benefits, whether the work is your core business). States pile on. California and others are stricter than a tweet.
| Factor | W-2 employee | 1099 contractor |
|---|---|---|
| Who controls how the work is done | You, generally | They, generally |
| Tools and hours | Often yours | Often theirs |
| Payroll tax | You withhold and match | They pay self-employment tax |
| Year-end form | W-2 | 1099-NEC (typical) |
| Benefits / unemployment | In play | Generally not |
Takeaway: the contract saying "contractor" is evidence. It is not a spell. If you set the hours, own the account, and they only work for you, you're probably looking at a W-2.
Example: A creator at $300K profit pays an editor $45K. The editor works 30 hours a week in the creator's Notion, on the creator's footage, with no other clients. That's employee-shaped. Paying them on Venmo and skipping the 1099 is two problems. A $90K/month agency that hires a specialist for a six-week brand sprint, their own LLC, their own gear, multiple clients, is contractor-shaped. Copy the second pattern onto the first person and you didn't save tax. You delayed a bill.
What Q4 is for
- List everyone you paid $600+ who isn't on payroll
- Get W-9s now, not on January 28
- Decide who should have been on payroll in 2026. Moving them in October is cleaner than explaining January
- Hire your kids only if it's a real job
- S-corp owners: you need a reasonable salary. You are not a 1099 to yourself
1099-NEC is generally due to the IRS and the recipient by January 31. That's a filing date. Classification is a Q4 operations date.
Bookkeeping that already codes vendors vs payroll makes this a report. Shoebox accounting makes it a forensic project during the October 15 hangover.
A tax plan is a workout. Payroll is the trainer actually loading the bar. A PDF of "just 1099 them" is not implementation.
Who this is for
Owners with a roster: editors, PAs, cleaners, PMs, media buyers.
Under $400K, get the labels honest and the 1099s out. Don't build a PEOtheater. Over $400K, misclassification is a real check. That's when taxes and payroll are both big expenses.
This is not legal advice on a specific worker. If you're in a fight about status, let's get your attorney on it before we move.
The short version
- W-2 vs 1099 is control and relationship, not a Venmo memo.
- Q4: W-9s, list, and who should be on payroll.
- 1099-NEC is a January form for a year you already paid.
- Don't 1099 yourself out of an S-corp salary.
- Under $400K: honest labels. Over $400K: the same, with more zeros.
FAQs
What is the difference between a 1099 and a W-2?
W-2 is an employee. You run payroll. 1099-NEC is how you report most nonemployee compensation to a contractor. The form follows the status. It doesn't create it.
When are 1099s due?
1099-NEC is generally due January 31 to the IRS and the recipient. Other 1099 types have their own dates. Don't mix 1099-K from a platform with your vendor 1099s without looking.
Can I switch a contractor to payroll in October?
Yes, going forward. You may still have a classification issue for January through September. Don't pretend the first nine months didn't happen if the facts were employee the whole time.
Do I 1099 an LLC?
Often yes if they're not a corporation and you paid $600+. W-9 tells you their tax classification. That's why you collect it before you pay, not after.
What if I paid someone in cash?
You still have a reporting and classification problem. Cash is not invisibility.
Will classifying everyone as a contractor save me tax?
It can under-withhold payroll tax until someone checks. Then you buy the tax plus penalties. That's not a strategy. That's a delay.
References
- IRS — Independent contractor vs employee
- IRS — Form 1099-NEC
- IRS — Form W-9
- IRS — Publication 15, Employer's Tax Guide
What to do next
If January is when you "figure out 1099s," that's the leak.
At CEOHAVEN, we help entrepreneurs and real estate investors with tax planning, tax preparation, and bookkeeping. You have a team that handles the forms. We make sure you actually know your numbers, including who is on payroll.
Book a call. We'll look at the roster, the W-9s, and what still has to move before year-end.
It's not about how much you make. It's about how much you keep.