11 — Contract Labor Updated for tax year 2025

What this line means

Payments you made to independent contractors who performed services for your business. This includes freelancers, subcontractors, and any other non-employee you hired. If you paid any single contractor $600 or more during the year, you are required to file a 1099-NEC for them. This line covers the total of all contract labor payments regardless of the amount per contractor.

Does this apply to you?

• You hired a freelance designer, developer, writer, or photographer for a project
• You subcontracted work to another business or tradesperson
• You paid a virtual assistant or bookkeeper who is not your employee
• You hired day laborers, cleaning crews, or maintenance workers as independent contractors

Easy to overlook

You must file 1099-NECs for contractors paid $600+ Paying a contractor is the easy part. The IRS also requires you to file a Form 1099-NEC for every individual or non-corporate entity you paid $600 or more. The 1099-NEC is due to the contractor by January 31 and to the IRS by January 31. Missing this deadline triggers penalties starting at $60 per form. Many sole proprietors do not realize they have this filing obligation. ¹ [SOURCE: IRS Form 1099-NEC filing requirements]

Worker classification matters If the IRS reclassifies someone you called a contractor as an employee, you owe back payroll taxes (employer share of Social Security and Medicare), penalties, and potentially the worker’s unpaid income tax withholding. The distinction hinges on control — do you control how the work is done, or only the result? If you set their hours, provide their tools, and direct their daily work, they are likely an employee. ² [SOURCE: IRS Schedule C instructions — Line 11]

Watch out for this

Not collecting a W-9 from contractors before paying them. Without a W-9, you do not have the contractor’s taxpayer identification number, which means you cannot file the required 1099-NEC. Collecting W-9s upfront — before the first payment — prevents a scramble at year-end when contractors are hard to reach.

Related lines on your return

• Line 26 — Schedule C — Wages; payments to employees go there, not here
• Line 10 — Schedule C — Commissions and fees; sales commissions to non-employees can go on either line
• Form 1099-NEC — Required for contractors paid $600 or more