To track subcontractor payments for tax time, collect a W-9 from every sub before you pay them, record every check in a register with the payee, date, amount and job, and total the payments per payee for the year. Reconcile the totals against your bank statements, then give the list to your accountant, who will tell you which payees need a Form 1099-NEC.
This guide is general information, not tax advice. Reporting rules and thresholds change, so check the current IRS instructions or ask your accountant before you rely on any figure.
What do you need to track about each subcontractor?
At the end of the year, your accountant will want the same few facts for each person or company you paid. If you capture them as you go, there is nothing to reconstruct.
- Legal name and business name, exactly as on the W-9.
- Address and taxpayer ID, from the W-9. Keep the form in a secure place, since it contains sensitive numbers.
- Every payment: check number, date, amount and which job it paid for.
- Whether the payee is a person or a company. Your accountant will ask, because corporations are often treated differently for reporting. Do not guess; ask them.
- Whether the payment was for labor, materials or both, if your invoices separate them. Materials you bought for the job are tracked differently from materials a sub bills you for. Ask your accountant how to code each.
Why should you collect the W-9 first?
A W-9 is the form a payee gives you with their name, address and taxpayer ID. For US businesses, subcontractors paid at or above the IRS reporting threshold generally need a Form 1099-NEC, and the threshold has been changing, so look up the current amount or ask your accountant. Because you cannot know in March whether a sub will cross that line by December, the usual practice is to collect a W-9 from every new sub before the first payment.
If a sub refuses or stalls, tell your accountant. They can explain what the rules say about withholding and what documentation to keep. Do not invent a taxpayer ID or copy one from an old invoice.
How do you build a subcontractor payment register?
A register is simply a list of every check you wrote, in order. A spreadsheet works. So does any check printing tool that saves a record of each check as you print it. What matters is that every row has the same columns, and that you add the row the day you pay.
| Check # | Date | Payee | Amount | Job | Invoice | Status |
|---|---|---|---|---|---|---|
| 2041 | Mar 14 | Reyes Framing LLC | $6,400.00 | Oak Ave | 118 | Cleared |
| 2042 | Mar 14 | Tran Electric | $3,600.00 | Pine St | 2207 | Outstanding |
| 2043 | Mar 20 | Tran Electric | $5,400.00 | Pine St | 2231 | Outstanding |
| 2044 | Mar 21 | Reyes Framing LLC | $2,950.00 | Oak Ave | 124 | Voided |
Notice the voided check in the last row. A voided check is not a payment, so it must not be counted in the totals. Mark it voided, keep the physical check with your records and note the replacement number. If you need the steps, see how to void a printed check.
How do you total payments per subcontractor?
Once you have a register, filter it by payee and add up the amounts. In a spreadsheet, a pivot table or a sorted list with subtotals does it in a minute. If your check printing tool can export the register as a CSV file, open that in Excel or Google Sheets and sort by payee.
In the example above, Tran Electric has two payments of $3,600.00 and $5,400.00 for a total of $9,000.00. Reyes Framing has $6,400.00 (the $2,950.00 check was voided and does not count) for a total of $6,400.00. Totals like this are exactly what your accountant needs.
The tax year question is worth a quick conversation with your accountant. Payments are usually counted for the year in which they are made, not the year of the invoice, but confirm how that applies to checks written late in December and to checks that are mailed or that clear in January.
How do you reconcile the register with your bank statement?
- Download or collect the bank statements for the year.
- Mark each register entry as cleared when it appears on a statement.
- List the outstanding checks: written but not yet cleared. Decide whether they are in transit or lost.
- Look for anything that cleared but is missing from the register. Add it, with the payee and job, after checking the check image.
- Compare the total of cleared and outstanding checks to the total you expect, and investigate any gap.
More on keeping records is in how to keep a digital record of printed checks. If you keep your books in a spreadsheet instead of accounting software, how to print checks without accounting software walks through that setup.
What records should you keep, and for how long?
Keep the W-9, the agreement or quote, each invoice, a record of each payment and any correspondence about disputed amounts. How long to keep them is something your accountant can answer for your situation and state. Many people keep tax-related records for several years, but do not rely on a rule of thumb. Keep digital copies as well as paper, and back them up.
Common mistakes at tax time
- Counting a voided check as a payment, or forgetting to count the replacement.
- Paying a sub under two spellings of the same name, which splits their total in half.
- Mixing payments to subs with payments to suppliers in the same list, so the labor totals are inflated.
- Losing the W-9, or never collecting it, and discovering it in January.
- Tracking only what cleared and ignoring checks still outstanding at year end.
Next steps
Start with a W-9 for every sub you pay this month. Then set up your register with the columns above, and total it quarterly instead of once a year. The related guide on how to print contractor checks covers the paying side, and how to pay subcontractors by check shows how to set up each payment. The check printing for contractors page pulls the workflow together.
Check Writer 123 saves every check you print in a register with a search box, and its register report can be printed or downloaded as a CSV file, which you can total by payee in a spreadsheet. Your accountant can tell you which payees need a 1099-NEC and prepare the forms.