1099 vs W-2 for Cleaning and Landscaping Crews: How to Tell, and What to Do in January

"Can I just pay my cleaners as 1099?" is one of the most common questions in this trade, and it usually gets asked the wrong way around. People treat it as a paperwork choice, as if you pick whichever form is easier. You don't. Classification is decided by how the work actually happens. The paperwork just records the answer.

I own a cleaning company in Colorado, and I build the software a lot of cleaning and landscaping owners use to pay their people, so I've had to think this through for my own business. What follows is the plain version: how the IRS looks at it, where states are stricter, and what to do in January.

I'm a business owner, not a CPA or an employment attorney, and this isn't tax or legal advice. Classification depends on the facts of your business and your state. Use this to understand the questions, then take your situation to a CPA or employment attorney before you change how you pay anyone.

The short answer

Most regular crew members at a cleaning or landscaping company look like employees. If someone works the schedule you set, at the houses you assign, with your supplies and equipment, following your checklist, every week, the IRS framework points toward W-2.

1099 fits a different kind of person: someone running their own business whom you hire for a piece of work. The window cleaner with their own company, insurance, and other clients. The irrigation contractor you call twice a year. The tree service you bring in for removals.

How the IRS decides: the common-law control test

The IRS looks at the whole relationship, grouping the evidence into three categories. The question running through all of them is whether you have the right to control what the worker does and how they do it. You don't have to exercise that control. Having the right to is enough.

Behavioral control

Do you control how the work gets done? In this trade that usually means: you set the schedule and route, you hand over a cleaning checklist or mowing pattern, you train people on your methods, you specify the products, and you inspect the work. Instructions and training are strong signals. A contractor is hired for a result. An employee is told how to get there.

Financial control

Who controls the business side? The IRS looks at who pays for tools and supplies, whether the worker can make or lose money on a job, whether they're paid a rate you set or a price they bid, whether they have other clients and advertise, and whether they carry real unreimbursed business expenses. A landscaper with their own trailer and mowers who can lose money on an underbid job looks independent. A crew member who gets into your truck and uses your mower does not.

Type of relationship

How do both sides understand the arrangement? Written contracts count, but a contract that calls someone a contractor doesn't decide it on its own. The IRS also looks at employee-type benefits, whether the relationship is expected to continue indefinitely, and whether the work is a key part of your regular business. That last one matters a lot here. If you run a cleaning company, someone who cleans houses for you every week is doing the core work of the company.

No single factor settles it. But when a worker lands on the employee side of most of these, writing "contractor" on a form doesn't change what they are.

If you genuinely can't tell, you or the worker can file Form SS-8 to ask the IRS for a determination. The IRS says that can take at least six months, so it's not a fix for a January deadline.

Why your regular crew probably looks like employees

If your people sit mostly in the left column, that's the employee pattern. It's simply what crew-based service work looks like.

State tests can be stricter than the IRS

States decide classification for their own purposes, such as unemployment insurance, wage laws, and workers' comp, and some tests are harder to pass than the federal one.

The best-known is the ABC test, used by California and Massachusetts among others. Under California's version, a worker is an employee unless the hiring business proves all three:

• A: the worker is free from your control and direction, under the contract and in fact
• B: the work is outside the usual course of your business
• C: the worker is customarily engaged in an independently established trade or business of the same nature

Prong B is where most cleaning and landscaping arrangements fail. A cleaning company paying someone to clean houses, or a landscaping company paying someone to mow, is paying for work squarely inside its usual course of business.

Here in Colorado, unemployment insurance law presumes a worker is in covered employment unless the business shows the person is free from control and direction, both under contract and in fact, and is customarily engaged in an independent trade, occupation, profession, or business related to the work. Not the full three-prong ABC test, but the same starting point: employee until you show otherwise.

The test can differ even within one state depending on whether the question is unemployment, wages, or workers' comp. This is exactly the part to check with someone who knows your state.

What misclassification costs

If you treat someone as a contractor who should have been an employee, the IRS says you can be held liable for the employment taxes on their pay: the income tax withholding, Social Security, and Medicare you should have handled. Your state can add its own assessments for unemployment insurance, workers' comp, and wage claims. Some relief exists where you had a reasonable basis for the classification and filed the required information returns consistently, but that's a CPA conversation, not something to plan around.

Workers can raise it themselves, too. A misclassified worker can use IRS Form 8919 to report the Social Security and Medicare taxes that weren't withheld.

I'm not going to quote penalty amounts, because they depend on the facts and the state. The point is simpler: the cost lands on the business, and it can reach back years.

When 1099 genuinely fits

Plenty of the people you pay really are contractors. In this trade that's often a carpet cleaning company you sub specialty jobs to, a window washing business, an irrigation, tree, or hardscape contractor on part of a project, or a snow removal company you hire seasonally. What they share: their own business name, tools, and insurance, other customers, a price they set, and work you couldn't direct step by step if you tried.

Collect the W-9 before the first payment

Form W-9 is how a contractor gives you their correct taxpayer identification number, an SSN or EIN, along with their legal name, address, and entity type. You need it to issue their 1099. Get it before the first payment, not in January:

1. It's the only time you have leverage. Before the first check it's a normal onboarding step. In January you're chasing someone you may not have worked with since August.
2. Entity type matters. Payments to corporations, including LLCs taxed as C or S corporations, generally don't need a 1099-NEC, with exceptions such as legal and medical services. The W-9 tells you which kind of payee you have.
3. No TIN can mean backup withholding. If a payee doesn't give you a correct TIN, the IRS may require you to withhold 24% from reportable payments.

And don't ask anyone to type their Social Security number into an email. Have them send the completed form or hand it to you.

The 1099-NEC threshold changed for 2026 payments

This is the part most people will have wrong in January.

For payments made through the end of 2025, the 1099-NEC threshold was $600, the number most of us have used for years. For payments made after December 31, 2025, it's $2,000, a change from the 2025 tax law commonly called the One Big Beautiful Bill Act. The IRS instructions for Forms 1099-MISC and 1099-NEC say the minimum threshold for tax years beginning after 2025 increased to $2,000 and may be adjusted for inflation beginning in calendar year 2027.

For you, reading this in late 2026:

• The forms you file in January 2027 cover 2026 payments, so the $2,000 threshold applies.
• You file a 1099-NEC for each non-employee you paid $2,000 or more for services in 2026, unless an exception applies, such as most corporations.
• For later years, check that year's IRS instructions, because inflation adjustments start in 2027.
• The threshold only decides who gets a form. A contractor still owes tax on everything they earned.

The deadline: January 31, which lands on a weekend in 2027

For Form 1099-NEC, January 31 is the deadline for both the copy you give the contractor and the copy you file with the IRS, and there's no automatic extension.

January 31, 2027 is a Sunday. IRS rules say that when a due date falls on a Saturday, Sunday, or legal holiday, filing on the next business day counts as on time, so the practical deadline for 2026 forms is Monday, February 1, 2027. Don't plan to use the extra day.

You can file 1099s with the IRS for free through its online portal, IRIS. You need a Transmitter Control Code first, which requires an EIN, so set that up before January if you've never used it.

A practical January workflow

1. Lock your contractor payments. Every 2026 payment to a contractor recorded and tagged to the right person. Unrecorded payments are what cause wrong totals.
2. Total each contractor's 2026 calendar-year payments.
3. Drop anyone under $2,000. No form needed for 2026.
4. Drop corporations, unless an exception like legal services applies. Your W-9s tell you who they are.
5. Confirm every remaining contractor has a W-9 with a TIN. Chase any gaps now.
6. File, or hand the list to your CPA or filing service. Name, address, TIN, and 2026 total for each.
7. Send each contractor their copy by the deadline, and keep a record of when and how.
8. Make sure your W-2 employees are handled by your payroll provider. W-2s have their own January 31 deadline and their own process.

If any of your "contractors" fail the tests above, January is a good time to raise it with your CPA, before another year of payments builds up.

What ValLedger does, and what it doesn't

The honest version matters more on this topic than most, so here's exactly where ValLedger helps and where it stops.

For contractors:

• Each subcontractor has a record with name, contact details, address, and TIN. The TIN is encrypted before it's stored, and the 1099 screens show it masked.
• Payments to a subcontractor are recorded as expenses tagged to them, and the 1099 report totals them per subcontractor for a tax year. In January and February it defaults to the year that just ended, since that's the one you're filing, and you can switch years.
• You can mark a W-9 as requested and optionally have ValLedger email the contractor. That email points them to the form on irs.gov and tells them not to email their SSN or EIN in plain text. When it comes back you mark it received, with the entity type and whether the TIN is an SSN or EIN. C and S corporations are flagged as generally exempt rather than hidden, so the call stays yours.
• Each person you pay has a profile where the owner can upload tax documents, including W-9s, W-4s, I-9s, W-2s, and 1099s, as PDFs or images. Uploading a W-9 to a contractor's profile marks it received. Only the workspace owner can upload these.
• The owner can export a 1099 CSV with name, TIN, address, and total paid, and generate a 1099-NEC PDF for a contractor once your business's legal name and EIN are saved. That PDF is a recipient copy and a payer copy for your records, not the official Copy A that goes to the IRS.

Check each total against the threshold for the year you're filing. For 2026 payments, that's $2,000.

What it doesn't do:

• It doesn't file 1099s with the IRS. It prepares the numbers and the contractor copies. You, your CPA, or a filing service submit them.
• It doesn't withhold payroll taxes. Your crew can clock in from their phones and approved timesheets roll into pay runs, but pay runs and stubs show gross pay, and every stub says no taxes were withheld. Withholding, W-2s, and payroll tax deposits belong with a payroll provider or your accountant.
• It doesn't decide classification. No software can. That's the CPA conversation.

For the day-to-day side, there's a longer piece on choosing cleaning business software and a landscaping software page.

The short version

Classification follows the work, not the form. People who work your schedule with your supplies doing your core work look like employees, and your state's test may be stricter than the IRS. Real subcontractors are real businesses. For them, collect a W-9 before the first payment, track what you pay, and remember that for 2026 payments the 1099-NEC threshold is $2,000, due January 31, which becomes February 1 in 2027.

And talk to a CPA. One hour on classification is worth more than anything else you'll do with your books this year.

If you'd like contractor totals and W-9 status in one place before January, you can try ValLedger free for 14 days, no credit card required.