Form 1099 for Freight Services: Should Transportation Companies Issue Them?

  • Logistics
  • 1/16/2025
Truck driver typing destination on tablet while sitting in cabin

Most organizations must issue 1099s by the end of January, but a lot of people don’t realize there is an exception for freight services.

Most organizations must issue 1099s for amounts paid to third parties by the end of January, but a lot of people don’t realize there is an exception for freight services. Does this exception apply to your company?

Many transportation companies still issue 1099s to freight contractors, but there are some downsides to it. Besides the effort and cost involved in sending out 1099s, the last few years the IRS has been matching 1099s filed with their records and sending out notices to the filer.

These matching issues can be due to a carrier or independent contractor providing a transportation company with an incorrect or illegible I-9, the carrier or independent contractor providing the IRS with incorrect information, or potentially the individuals responsible for filing the 1099s filling out the 1099s incorrectly. In some instances, the IRS has been proposing penalties for filing information returns incorrectly for up to $330 per record deemed to be incorrect (could be missing or incorrect name, TIN, or address). We’ve seen some of these proposed penalties reach six figures over the past few years.

Should transportation companies issue 1099s for freight services?

Considering the potential proposed penalties for filing informational return incorrectly, should transportation companies issue 1099s for freight services? There are pros and cons for sure. On the pro side, issuing 1099s can help contractors or independent carriers figure out how much income they earned in a year. It also can help transportation companies provide further evidence these carrier and/or independent contractors are not employees.

On the con side are the potential penalties for filing information returns incorrectly, the time and effort involved, and the costs. Transportation companies are also relying on records provided by these carriers, and if they’ve provided an incorrect record, it could put transportation companies in a tough spot. It’s worth noting even though 1099s may not be required for freight services, taxpayers are still responsible for the accuracy of any and all forms filed with the IRS. But it’s not an easy decision to make.

How CLA can help with 1099s for freight services

In addition to issuing 1099s, CLA can also help you decide if you should file 1099s for freight services. Reach out to our transportation team for assistance. 

This blog contains general information and does not constitute the rendering of legal, accounting, investment, tax, or other professional services. Consult with your advisors regarding the applicability of this content to your specific circumstances.

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