Do I Need to Issue a 1099 to My Landscaper?

Hiring a landscaper for your business or rental property may come with unexpected tax obligations. The IRS requires businesses to report certain payments to independent contractors, and failure to comply can result in penalties. Whether you need to issue a 1099 form depends on the amount paid, the landscaper’s business structure, and their classification as an independent contractor.

Payment Threshold Requirements

Businesses must file Form 1099-NEC if they pay an independent contractor $600 or more in non-employee compensation within a tax year. This applies to payments made by cash, check, or direct bank transfer. However, payments through third-party processors like PayPal, Venmo (using “Goods and Services”), or credit cards follow different reporting rules. In these cases, the payment processor, not the business, is responsible for issuing Form 1099-K if total payments exceed $20,000 and involve more than 200 transactions annually.

Some states have lower thresholds. Massachusetts and Vermont require third-party processors to issue a 1099-K for payments exceeding $600, regardless of the number of transactions. Businesses should verify state-specific rules to ensure compliance.

Contractor Classification

Determining whether a landscaper qualifies as an independent contractor is essential. The IRS differentiates independent contractors from employees based on control over the work. If you dictate how, when, and where the landscaper works, provide tools, or require training, they may be classified as an employee. Employees receive a W-2 and are subject to payroll taxes, while independent contractors receive a 1099-NEC.

The IRS uses three factors to assess classification:

– Behavioral Control – If you set the landscaper’s schedule, provide instructions, or require specific methods, they may be an employee.
– Financial Control – Independent contractors typically invest in their business, own equipment, advertise services, and work with multiple clients.
– Relationship of the Parties – Providing benefits or maintaining a long-term, exclusive relationship may indicate employee status.

Misclassifying an employee as an independent contractor can lead to IRS penalties, back taxes, and liability for unpaid payroll taxes.

Corporate Entity Exceptions

Not all landscapers require a 1099-NEC. Payments to C corporations and S corporations are generally exempt unless related to legal or medical services. Many large landscaping companies operate as corporations, meaning businesses do not need to issue a 1099-NEC for their services.

However, many landscapers are sole proprietors or LLCs. LLCs do not automatically qualify for the exemption. If an LLC is taxed as a disregarded entity or a partnership, a 1099-NEC is required for payments over $600. If the LLC elects S corporation or C corporation status, the exemption applies.

Collecting Necessary Tax Information

Before issuing a 1099-NEC, businesses should request a completed Form W-9 from the landscaper. This form provides the landscaper’s legal name, business name (if applicable), tax classification, address, and taxpayer identification number (TIN). The TIN may be a Social Security Number (SSN) for sole proprietors or an Employer Identification Number (EIN) for businesses.

If a landscaper does not provide a valid TIN, the IRS requires backup withholding at 24%. This means the business must withhold and remit a portion of the landscaper’s payment to the IRS. To avoid this, businesses can use the TIN Matching Program to verify the number before issuing payments.

Submitting the Required Form

Once tax details are collected, businesses must accurately complete and submit Form 1099-NEC. The form requires the landscaper’s name, address, and TIN, along with the total amount paid during the tax year. Payments should be reported in Box 1: Nonemployee Compensation. If backup withholding was applied, report the withheld amount in Box 4.

The deadline to provide Form 1099-NEC to the recipient and file it with the IRS is January 31. Businesses filing 250 or more forms must submit them electronically through the IRS FIRE (Filing Information Returns Electronically) system. Smaller filers can submit paper copies using Form 1096 as a summary transmittal. Some states require separate reporting, so businesses should verify local requirements to ensure compliance.