How to Fire a 1099 Contractor
Important considerations when ending a contractor relationship under federal rules.
Key Point
Unlike employees, independent contractors can typically be terminated at any time, subject to the terms of your contract. However, you still have compliance obligations for work already performed.
Contract Terms
Review your contract for termination clauses and notice requirements.
- Check if contract specifies termination procedures
- Follow any required notice periods
- Understand any penalties or fees for early termination
Final Payment
Ensure all work is completed and final payment is made.
- Complete final payment for work performed
- Get confirmation that all deliverables are received
- Keep records of final payment date
1099 Filing
File required 1099 forms even if the relationship ends mid-year.
- If payments totaled $600 or more, file 1099-NEC
- File by January 31st for the previous tax year
- Send Copy B to the contractor by January 31st
Documentation
Keep records of the termination and final payments.
- Document the termination date and reason
- Keep final payment records
- Retain all documentation for at least 4 years
Termination Best Practices
Before Terminating:
- Review your contract for termination clauses
- Ensure all completed work is paid for
- Collect any deliverables or work product
During Termination:
- Provide clear, written notice if required by contract
- Document the termination date
- Make final payment promptly
After Termination:
- File 1099-NEC if payments totaled $600 or more
- Keep all records for tax purposes
- Update your contractor records