Do Rhode Island Contractors Need to File 1099s for Subcontractors?

By Jeff Bibby, CPA · October 16, 2026 · 3 min read

Short answer: yes, in most cases. If you pay an unincorporated subcontractor for work on your jobs, the IRS expects a Form 1099-NEC once your payments to them for the year go over the reporting threshold. Most contractors know that. The trouble is that they think about it once a year, in late January, while chasing a sub's tax ID number by text message.

The threshold went up

For years the threshold was $600. Starting with payments made in 2026, you file only when you pay a subcontractor more than $2,000 for the year, and it will be adjusted for inflation after that. Forms filed in January 2026 for 2025 payments still used the old $600 threshold.

Don't let the higher number make you sloppy. Most of your regular subs will clear $2,000 easily, and the IRS matches 1099s against what subs report on their own returns.

Who gets a 1099 and who doesn't

• Yes: individuals, sole proprietors, partnerships and most LLCs you pay for services, including labor-and-materials jobs.
• Usually no: corporations, including LLCs taxed as S or C corporations. The big exception: attorneys get a 1099 even if they're incorporated.
• No: payments you made by credit card or through a payment app like PayPal or Venmo for business. Those get reported by the card or payment company instead.
• No: your W-2 employees. Their pay goes on a W-2 through payroll.

Get the W-9 before the first check

The single best habit: don't pay a new sub until you have a signed Form W-9 with their legal name, business type and tax ID number. Once they've been paid, your leverage is gone. If a sub won't give you a W-9, the IRS expects you to withhold 24% backup withholding from their payments, which tends to change minds quickly.

While you're at it, get a current certificate of insurance. If a sub has no workers' comp or liability coverage, your insurance company may charge you for their payroll at audit time.

Deadlines and penalties

Form 1099-NEC is due to the sub and to the IRS by January 31. Late or missing forms carry per-form penalties that climb the later you file. Leaving off a correct tax ID number can trigger a penalty and a backup withholding notice.

The bigger issue: sub or employee?

A 1099 doesn't make someone a subcontractor. If you set their hours, supply their tools, and they work only for you, the state may see an employee. Misclassification can mean back payroll taxes, unemployment insurance and workers' comp. If you have a crew member who's been "on 1099" for years, it's worth a conversation.

How to make January boring

1. Collect a W-9 and certificate of insurance before the first payment.
2. Set up each sub as a vendor in QuickBooks and mark them as 1099-eligible.
3. Pay subs by check or bank transfer, not cash.
4. Review your 1099 vendor list in December, not January.

That's the whole system. Done monthly, it takes almost no time.

This article is general information, not tax or legal advice for your specific situation. Tax rules change; talk with us before acting on it.