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Gusto 1099: paying contractors and filing 1099-NECs

Contractors fill in their own W-9, you pay them from the same account as payroll, and the 1099-NECs file themselves in January. Here’s how each step works and the dates for 2026 forms.

Shanin Drucquer

Shanin DrucquerUpdated October 2026

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Short answer

Gusto pays contractors by direct deposit or check and files their 1099-NECs with the IRS and states for you. Forms for 2026 payments are due to contractors by February 1, 2027, since January 31 falls on a Sunday.

$2,000

1099-NEC threshold for payments made in 2026, up from $600

Feb 1

2027 deadline to send and file 2026 forms

10

Information returns in a year that require e-filing

24%

IRS backup withholding when a contractor gives no TIN

Have these ready

  • Each contractor’s personal email address
  • Whether they work as an individual or a registered business
  • Their rate, if you pay by the hour
  • Totals for anything you paid them outside Gusto this year

  1. Step 1 of 7 · 3 min

    Make sure they’re a contractor

    Gusto won’t decide whether someone is a W-2 employee or a 1099 contractor; that call is yours. The IRS asks whether you have the right to control what the worker does and how they do the job. The more you direct the details, the more it looks like employment.

    Not sure? The IRS guide linked in the sources below walks through the factors, and your accountant can make the call with you.

  2. Step 2 of 7 · 3 min

    Add the contractor in Gusto

    Go to People, select Add, then Add a person. Choose Individual contractor or Business contractor, pick United States, and enter a personal email, not a work one. You can send a contractor agreement from the same screen.

    Worker type

    Add a person

    • Employee
    • Individual contractor
    • Business contractor

    Continue

    Screens are recreated with example data.

  3. Step 3 of 7 · 2 min

    Let them fill in their own W-9

    Gusto emails the contractor to finish onboarding: their SSN, ITIN, or EIN, their address, and how they want to be paid. That becomes an electronic W-9, stored under Documents in their profile. A W-9 stays in your records; it doesn’t go to the IRS.

    Watch out

    Gusto doesn’t support backup withholding. If a contractor won’t give you a taxpayer ID, the IRS expects 24% withheld from their payments, so get the W-9 done before the first payment.

    Onboarding, Diego R.

    Individual contractor

    • Taxpayer ID (Form W-9)Signed
    • Home addressDone
    • Direct depositWaiting on Diego

  4. Step 4 of 7 · 5 min

    Pay them

    Enter hours, a flat amount, or both, or upload a CSV or the contractor’s invoices. Payments go by direct deposit at the same speed as your payroll, or by a check you print and hand over. There’s no limit on how often you pay, and you can set recurring payments for a monthly retainer.

    Contractor payment

    Pay date Fri, Nov 6

    Diego R. · 12 hrs at $45
    $540.00
    Diego R. · flat project fee
    $300.00
    Total
    $840.00

    Submit payment

  5. Step 5 of 7 · 3 min

    Record anything you paid outside Gusto

    If you paid a contractor by check or app earlier in the year, add it as a historical payment so the 1099-NEC shows their full total. Do it before the year-end deadline: Gusto can’t generate an original 1099 for payments reported after it.

  6. Step 6 of 7 · 2 min

    Check the 1099-NECs in January

    Forms appear in Gusto in mid-to-late January. Check names, ID numbers, and totals before they go out. Gusto files every contractor paid through it, even below the $2,000 threshold, and sends the federal and state copies itself, so there’s no Form 1096 to file.

    Paying an LLC taxed as a corporation? Most corporations don’t need a 1099-NEC. Ask Gusto to stop that filing if it doesn’t apply.

  7. Step 7 of 7 · 2 min

    Get copies to contractors by February 1

    Gusto emails each contractor that their form is ready in their account. You still choose how they get a copy: have Gusto mail it (order by January 23), mail or hand it out yourself, or deliver it electronically if the contractor has agreed to that.

    Watch out

    There’s no automatic extension for the 1099-NEC. Late or missing forms can bring IRS penalties.

    Open Gusto

    2026 Forms 1099-NEC

    Due Mon, Feb 1, 2027

    • Filed with IRS and stateBy Gusto
    • Diego R. · paperlessEmailed
    • Kim Tree Service LLCMail by Feb 1

What paying contractors in Gusto costs

Gusto closed its contractor-only plan to new customers on October 1, 2026. Contractors are now paid on a regular plan, which also covers W-2 employees when you hire one. Simple is $49 + $6/person, and Plus is $80 + $12/person.

The per-person fee only applies in a month you actually pay a contractor or record a payment. A contractor sitting in your account costs nothing, and paying the same person three times in a month is still one fee.

“Gusto files my payroll taxes, and both times a tax notice showed up, they sorted it.”
Shanin Drucquer, Iconic Landscaping

The 1099-NEC rules for 2026 payments

A 1099-NEC reports what you paid a non-employee for work. For payments made in 2026, the IRS threshold is $2,000 a year per contractor, up from $600. The deadline to send the contractor their copy and file with the IRS is the same day: January 31, which moves to Monday, February 1, 2027.

Gusto doesn’t cover every 1099 situation, so these stay with you or your accountant:

  • 1099-MISC and other 1099 types, such as rent paid to a landlord
  • Backup withholding, and states that require contractor withholding
  • Withholding or tax reporting for contractors based outside the US
  • Using a second payroll provider for the same business: while Gusto files for you, no one else can

Common questions

Does Gusto file 1099s for contractors?

Yes. Gusto files Form 1099-NEC with the IRS and any required states for every US contractor you paid through it, and makes each form available in the contractor’s Gusto account.

When are 1099s due for 2026?

February 1, 2027. The normal deadline is January 31, but it falls on a Sunday in 2027, so it moves to the next business day. That date covers both the contractor’s copy and the IRS filing.

Does Gusto still have a contractor-only plan?

Not for new customers. Gusto closed it on October 1, 2026; companies already on it keep it. New accounts pay contractors on Simple ($49 + $6/person) or a higher plan, with the per-person fee charged only in months you pay someone.

Do I need a 1099 for a contractor I paid under $2,000?

For 2026 payments, the IRS threshold is $2,000, so you may not need one. Gusto files for every contractor paid through it anyway, and you can ask it to stop a filing you don’t want.

How do contractors fill out a W-9 in Gusto?

When you add them, Gusto emails an invite to onboard. They enter their taxpayer ID and address and sign an electronic W-9, which you can view under Documents in their profile.

Can Gusto pay contractors if I don’t run payroll?

Yes. You can pay contractors in Gusto without any W-2 employees, by direct deposit or check.

Sources: Gusto: add and pay US contractors, Gusto: distribute 1099-NEC forms, IRS: Instructions for Form 1099-NEC, IRS: General Instructions for Information Returns, IRS: backup withholding, IRS: independent contractor or employee?.

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