All-In-One Banking
Features
Resources
Plans
Sign inGet started
Sign inGet started
ResourcesBusiness 101

6 Reasons To Pay 1099 Contractors Using Found

Business 101June 06, 2024

When you work for yourself, you're always looking for ways to grow your business and stay ahead of the competition. Hiring 1099 contractors is a great way to access the specialized skills you need without the long-term commitment and cost of a full-time employee. 

In fact, 20% of Found customers pay 1099 contractors, and they aren’t the only ones. Even the biggest players in the game make heavy use of freelancers and contractors. According to DemandSage, Google employs more freelancers than it does permanent workers.

While they can add great value to your business, hiring 1099 contractors also adds complexity: You have to keep track of who's who, make sure you have all the right documents, and stay mindful of deadlines to avoid IRS fines. It takes up a lot of mental space and time, which is in short supply when you’re a small business owner.

6 Reasons to Pay 1099 Contractors Through Found

Over the past few years, thousands of business owners have simplified managing and paying contractors thanks to Found’s contractor management tools. Here are six reasons you should join them:

#1: Simplify your workflow as a business owner

Technology should be a game-changer when it comes to managing your finances and streamlining your workflow. But if you spend your days toggling back and forth between programs like Quickbooks, invoicing software, or your personal Venmo account, it can start to feel like all that technology is slowing you down. 

With Found, you can do more with less. Found simplifies managing your 1099 contractors from start to finish. From easy onboarding to tracked payments, Found takes care of the nitty-gritty details, saving you time and headaches. You can:

  • Request and collect W-9 forms with a single click

  • Generate 1099-NEC forms in one spot

  • Save draft payments to streamline your workflow

  • Duplicate previous payments to save time

  • Schedule payments for a future date

  • Manually track payments made outside of Found so Found can help you generate 1099-NECs

  • Automatically track contractor expenses as a business deduction

Not only will you save time and money, but you will also gain a clearer picture of your business’s overall financial health.

#2: Take the "work" out of managing paperwork for your contractors

Hiring contractors comes with a lot of new IRS forms to navigate. From W-9s to 1099-NECs, all of these forms are required to stay on the IRS’s good side. 

With each new form comes an added burden, but Found takes the “work” out of paperwork. When you use Found’s contractor management tools, Found will:

  • Make it easy to request a W-9 form from newly-onboarded contractors

  • Send automated email reminders to collect W-9 forms if they don’t fill them out, so you can stop pestering them

  • Generate 1099-NECs for any contractor you’ve paid more than $600 in a tax year

  • Allow the contractor to enter their own payment details, so you can be hands-off when handling sensitive information like bank account details

Gone are the piles of paperwork—everything’s all in one (digital) place. As an added bonus, all of this is done through our secure online platform so you don’t have to worry about jeopardizing your contractor’s sensitive information. 

#3: Fee-free contractor management

Running a small business means always looking for ways to cut costs and maximize your bottom line. When it comes to managing your team of contractors, the last thing you want is pricey payroll software fees.

Imagine having a team of 5 contractors who support your small business. With most professional payroll or payment providers, you'd be paying significant monthly fees just to manage their payments. These fees can quickly add up and cut away from your bottom line. Sure, you can write them off as a tax-deductible business expense, but what if you didn't have to pay them in the first place?

That's where Found comes in. Our contractor management tools are completely fee-free. That's right—no fixed fees, no per-contractor fees, no hidden costs. You can manage your entire team of contractors without worrying about additional expenses.

With Found, you get so much more for free. Our platform offers a comprehensive suite of tools to streamline your contractor management process, from onboarding to payment processing and tax compliance. You can save time and money while ensuring that your contractors are paid accurately and on time.

#4: Save money by marking 1099 contractors as tax-deductible expenses

With so many potential deductions and expenses to keep track of, it's no wonder that only 22% of self-employed people feel like they're taking full advantage of tax-deductible expenses. This means that a significant portion of small business owners are missing out on valuable savings.

Contractor services are often overlooked as a tax-deductible business expense. If you hire contractors to help run your business, their fees can likely be deducted as a business expense, reducing your taxable income. However, keeping track of these expenses and categorizing them correctly can be time-consuming and confusing.

Found simplifies this whole process to save you time and money:

  1. You pay your contractors through Found

  2. Found automatically tags these transactions as business expenses

  3. Easily claim them as deductions come tax time

  4. Found generates your Schedule C at the end of each tax year (if you’re a sole proprietor)

#5: Improved tax compliance

Many small business owners find themselves navigating tax compliance and ever-changing IRS requirements without any training, which can lead to costly mistakes and hefty fines. Tax rules are constantly changing, and staying up-to-date can feel like a full-time job in itself, especially if you don’t have the help of a Certified Public Accountant (CPA). 

For example, take the new phased roll-out of the $600 tax rule for 1099-K reporting thresholds. For a long time, many freelancers and contractors were accepting payment for their work via peer-to-peer payment apps like Venmo or Cash App, and then neglecting to report that as income on their taxes. The IRS dropped the reporting threshold from $20,000 to $600 with the goal to capture the previously unreported income and hold small business owners accountable. The new $600 threshold won’t go into effect until the 2025 tax year, so it’s a good idea to lay the groundwork for compliance now.

When you use personal payment apps like Venmo or Cash App for business transactions, it can blur the line between personal and business finances, making it difficult to track expenses and stay compliant with IRS regulations. This financial separation is also important in the event you’re ever audited—keeping things separate makes it easy to show the IRS what they need to see and ensures that there are no questions about whether a particular expense was for business or not. With Found, you can sleep easy at night knowing that your business is staying above board.

#6: Faster end-to-end payments

Building strong relationships with contractors is key to working with them. The best way to keep your contractors happy is to pay them on time. However, managing payments for multiple contractors can quickly become a headache when you manage multiple contractors, especially when everyone has their own preferred payment method or timing.

Found makes paying your contractors when and how they want easy. You simply send your contractor a payment link via text or email, and when they accept their payment, they’re given choices on how to get their hard-earned money. Your process is streamlined, and your contractors get freedom of choice. 

Found offers higher limits than some of the traditional peer-to-peer payment apps and the opportunity for instant payments. With unlimited outbound ACH limits for contractor payments from your Found account, you can pay as many contractors as much as you owe them. If your contractors want to get paid instantly (and who doesn’t?), they can sign up for a Found account–sign-up is free. Not only will they receive payments instantly, but they can also spend their earnings instantly using a Found virtual or physical debit card and get the added benefits of built-in bookkeeping and tax tools for managing their freelance work. It’s a win-win for everyone involved. 

FAQs about paying contractors through Found

How much does Found’s contractor management tool cost?

Nothing! It’s completely free to use—no strings attached. Unlike other contractor management software, Found’s contractor tools have no monthly or per-contractor fees.

Can my 1099 contractor choose how to get paid? 

Yes, when you pay a contractor through Found, they can choose from a range of flexible deposit options. It’s as easy as sending a text or email and they’ll be able to choose the payment method that works best for them. 

Does my 1099 contractor need a Found account to get paid?

No, contractors you pay through Found aren’t required to have a Found account. If they do have an account, they’ll get paid faster, be able to spend their money instantly using their Found debit card, and securely share their W-9 form with you. Signing up for Found is free, and they’ll get access to our powerful bookkeeping and tax-saving features. If they choose a different payment option, there may be fees or delays in accessing their funds. 

What happens if I don’t collect a W-9 form from my contractor?

While collecting a W-9 form from your 1099 contractor isn’t always required, failing to collect the form can lead to several consequences as it contains critical information needed to generate 1099-NECs. If you don't have a contractor's W-9 on file and you pay them more than $600 in a year, you may be required to withhold 24% of their payments for federal income taxes, called “backup withholding”. 

If you fail to collect a W-9 and file a 1099-NEC with missing or incorrect information, you could face penalties for each form not filed. On top of all that, without a W-9, you may not have all the necessary information to complete a 1099-NEC form, making it hard for you to meet the January 31st filing deadline. Generally, it’s best practice to collect a W-9 from each contractor before making any payments, and with Found, it’s easier than ever. 

Will Found generate 1099-NEC forms for me at the end of the year?

Yes, Found will create completed 1099-NEC forms for you. Found automatically tracks payments that you make to contractors from your Found account, as well as any additional payments that you’ve recorded manually. If you have paid a contractor $600 or more in a calendar year, you’ll need to send your contractor a 1099-NEC and file that form with the IRS. This form is due to the contractor and IRS by January 31. 1099-NECs for the previous year can be downloaded in January as PDFs, which you can then distribute to contractors through email, SMS, or other means. 

Can my contractor accept their payment via Zelle?

We currently are unable to support Zelle, however contractors can choose to receive their money instantly via debit card (1.75% fee with $0.50 min) or standard ACH bank transfer (1-2 business days).

Disclaimer: The information on this website is not intended to provide, and should not be relied on, for tax advice.

Related Guides

How to Pay Freelancers: Payment Methods, Tax Forms, and Best Practices
May 09, 20247 min read

How to Pay Freelancers: Payment Methods, Tax Forms, and Best Practices

Business 101
W-9 Forms: A Guide for Self-Employed 1099 Contractors
May 19, 20236 min read

W-9 Forms: A Guide for Self-Employed 1099 Contractors

Accounting and Taxes
6 Mistakes to Avoid When Hiring 1099 Contractors
July 17, 20237 min read

6 Mistakes to Avoid When Hiring 1099 Contractors

Business 101
How to Pay Freelancers: Payment Methods, Tax Forms, and Best Practices
May 09, 20247 min read

How to Pay Freelancers: Payment Methods, Tax Forms, and Best Practices

Business 101
  • App icon cactus
    All-in-one banking
    for the self-employed

    PRODUCTS
    Banking



    Have Questions?
    Email our support team:
    Follow Us

    *Found is a financial technology company, not a bank. Banking services are provided by Piermont Bank, Member FDIC. The funds in your account are FDIC-insured up to $250,000 per depositor for each account ownership category.

    The Found Mastercard Business debit card is issued by Piermont Bank pursuant to a license from Mastercard Inc.

    The information on this website is not intended to provide, and should not be relied on, for tax advice.

    **Direct deposit funds may be available for use for up to two days before the scheduled payment date. Early availability is not guaranteed.

    Found partners with various providers to enable you to compare offers from participating institutions, such as lending, filing service, and insurance providers. Found is not a lender, a filing service, nor an insurance provider.