Written and maintained by CASRAI Editorial Board
Last updated
Short answer
A 1099 contractor is a worker the paying business treats as self-employed rather than as an employee. The business reports what it paid on Form 1099-NEC, and the contractor handles their own income tax and self-employment tax. The label does not settle the question: the IRS looks at the real working relationship. This page is general information, not tax or legal advice.
Definition and scope
“1099” is the name of an information-return form family, not a legal status. “Independent contractor” is the status; a payer reports nonemployee compensation to that person on Form 1099-NEC. The IRS says its Form 1099-NEC must be used to report payments made during the tax year that total or exceed the reportable threshold set in the form instructions. For payments made in 2026, the current instructions give that figure as $2,000, and the form is due to the payee and the IRS by January 31. Filers of 10 or more information returns (counted across all types) must e-file.
The IRS describes the worker’s status as something the business can decide, or the IRS can decide after reviewing the facts and circumstances. The detailed side-by-side with employee treatment is on 1099 vs W-2; this page keeps to the summary and the supplier workflow.
How the IRS decides: three categories of evidence
The IRS’s common-law test groups the facts into three categories. Each has a plain question that a business can use to organise what it keeps on file.
| IRS category | IRS question or examples | What a payer can document |
|---|---|---|
| Behavioral | Does the company control or have the right to control what the worker does and how the worker does the job? | Who sets methods and instructions, and who decides how the work is carried out |
| Financial | Are the business aspects of the worker’s job controlled by the payer? Pay, expense reimbursement, tools and materials are named as examples. | How the worker is paid, who supplies tools and materials, and how expenses are handled |
| Type of relationship | Are there written contracts or employee-type benefits such as a pension plan, insurance or vacation pay? The IRS also lists permanency and whether the work is key to the business. | The written agreement, any benefits offered, and whether the engagement has a defined scope or runs indefinitely |
Source: IRS, “Independent Contractor (Self-Employed) or Employee?” (checked 2026-11-03). The third column restates the IRS question as a record-keeping prompt; it is not an IRS checklist.
If the business and the worker disagree, or want an official answer, either one may file Form SS-8 and ask the IRS to determine status. The IRS notes that a determination may take at least six months.
What the payer files and what the contractor pays
Payer side
The payer reports nonemployee compensation on Form 1099-NEC when payments reach the threshold in the current instructions ($2,000 for payments made in 2026), furnishes the statement to the contractor, and files with the IRS by January 31.
Contractor side
Self-employment (SE) tax is Social Security and Medicare tax only, separate from income tax; self-employed people generally pay both. Per the IRS, a person must file an income tax return if net self-employment earnings are $400 or more. SE tax is figured on Schedule SE, using Schedule C results, and because no employer withholds, the contractor pays estimated tax during the year, generally quarterly. Source: IRS Self-Employed Individuals Tax Center (checked 2026-11-03).
Where it matters for medical supply buyers and sellers
Medical, laboratory and equipment businesses often engage people who are not on payroll. The CASRAI pages below cover the role-specific context; this page does not repeat their content.
- Independent sales representatives: see 1099 medical sales rep and medical equipment sales representative.
- Delivery work and contractor contracts: see medical supply delivery business.
- Written agreements: see the independent contractor agreement template.
- Supplier paperwork on the buying side: see the vendor onboarding documentation checklist.
A practical workflow that follows from the IRS sources: (1) decide status using the three categories above and write down the facts; (2) keep the signed agreement; (3) track total payments per contractor against the Form 1099-NEC threshold; (4) file and furnish by January 31; (5) if status is genuinely unclear, consider Form SS-8 or professional advice.
Common misunderstandings
“If I issue a 1099, the worker is a contractor.”
The form reports payments; it does not decide status. The IRS says it reviews the facts and circumstances.
“A contractor owes no tax until a 1099 arrives.”
Self-employment income is taxable whether or not a form is issued, and the IRS notes that estimated tax is paid during the year because nothing is withheld.
“A signed contract is enough.”
A written contract is one factor under the type-of-relationship category, alongside behavioral and financial evidence.
“The threshold is always $600.”
The current IRS instructions give $2,000 for payments made in 2026. Check the instructions for the year in question.
FAQ
What is meant by “1099 contractor”?
A worker paid as self-employed, whose payments the payer reports on Form 1099-NEC rather than through payroll. The status depends on the working relationship, not the form.
How does it apply to medical supply buyers and sellers?
Suppliers and clinics may engage independent reps, drivers or service technicians. Each engagement should be assessed with the IRS’s three categories and documented; the linked CASRAI guides above cover those roles.
What are common examples and common mistakes?
Common examples on the supplier side include independent sales reps and delivery drivers. Common mistakes are relying on the label, skipping the written record, and missing the January 31 filing date. Whether a specific worker qualifies is a fact-based question for the IRS or a qualified adviser.
Sources
- IRS, Independent Contractor (Self-Employed) or Employee?, checked 2026-11-03.
- IRS, Self-Employed Individuals Tax Center, checked 2026-11-03.
- IRS, Forms and Associated Taxes for Independent Contractors, page last reviewed 11 September 2026, checked 2026-11-03.
- IRS, Instructions for Forms 1099-MISC and 1099-NEC (12/2026), checked 2026-11-03.
