Understanding 1099s: What tour and activity operators need to know

Ever found yourself scrambling at tax time to figure out who needs a 1099? You’re not alone. From seasonal guides to freelance photographers and part-time instructors, it’s common to rely on non-employees to deliver amazing experiences. But when tax season rolls around, missing one 1099 can lead to costly penalties and compliance headaches.

This guide breaks down exactly what tour and activity operators need to know about 1099s — what they are, when to use them, and how to stay organized so filing is smooth and stress-free.

FareHarbor B.V. and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before taking any tax action.

Contractors vs. employees: Why the distinction matters

Understanding the difference between an independent contractor and an employee is essential for compliance. The IRS uses three key categories to determine classification:

IRS classification guidelines

• Behavioral control
  • Do you control how the work is done?
  • Do you provide training, set schedules, or dictate methods?

• Financial control
  • Do you control how the worker is paid?
  • Do you reimburse expenses or provide tools and supplies?

• Type of relationship
  • Is the work ongoing or project-based?
  • Is there a written contract or expectation of benefits?

If the answer leans toward control, the worker may be an employee. If they operate independently, handle their own schedule, and work for multiple businesses, they are more likely a contractor.

Why misclassification is risky

Misclassifying a worker can result in:

• Back payroll taxes
• Interest and penalties from the IRS
• Liability for benefits, including unemployment or workers’ comp
• Legal consequences, including audits and fines

Helpful resource: The IRS offers a classification checklist to help clarify status.

What are 1099s used for in the tour & activity industry?

A 1099 form reports income paid to individuals who are not employees — like independent contractors or freelancers. For many tour and activity operators, this includes seasonal guides, instructors, marketing consultants, and other contracted pros who help deliver or support your experiences.

If you paid a non-employee $600 or more during the year for services, you’re likely required to issue a 1099-NEC (Non-employee Compensation). In some cases, you may need to file a 1099-MISC (Miscellaneous Income) instead. More on that below.

Why this matters for tour and activity operators

Many operators rely on flexible, part-time help — especially during busy months. But just because someone isn’t on your payroll doesn’t mean the IRS isn’t watching.

Failing to file the right 1099 form can lead to:

• Hefty penalties for late or missing forms
• IRS scrutiny or audits
• Unhappy contractors who can’t report their income accurately

And if you’re not sure whether someone qualifies as a contractor or employee, misclassifying them can trigger even bigger issues — including back taxes, unpaid benefits, and legal exposure.

Who needs a 1099-NEC or 1099-MISC?

The most common form for tour and activity operators is the 1099-NEC, which reports payments made to non-employees. If you paid an individual or unincorporated business $600 or more during the tax year for services, and they are not on payroll, you likely need to send them this form.

When to issue a 1099-NEC

Issue a 1099-NEC if:

• The recipient is not an employee
• They provided a service (not just goods)
• You paid them $600 or more during the calendar year
• They are a sole proprietor, partnership, or LLC, but not a corporation (with some exceptions)

Examples:

• Freelance scuba instructor hired for private lessons
• Local photographer contracted to capture tour moments
• Seasonal guide brought in for overflow during peak season
• Freelance yoga instructor hired for a special wellness retreat

When to use a 1099-MISC instead

The 1099-MISC is used for specific payments that do not fall under the “services” category. These payments may include:

• Rent (e.g., office space or storage rented from an individual)
• Prizes or awards not tied to services rendered
• Commissions
• Payments to public relations (PR) consultants or marketing firms

Examples:

• You pay $800/month to rent a boathouse from a private individual 
• You give a $1,000 prize to a customer in a tour contest
• You pay $700 in commissions to a local vendor for promoting your tours
• You hire a freelance PR consultant for a seasonal marketing campaign and pay them $750

Pro tip: If you pay someone who isn’t on your payroll and they’re not a corporation, you probably owe them a 1099.

Deadlines and penalties: Stay on track to avoid fees

Missing a 1099 deadline or submitting incorrect information can lead to fines that impact your bottom line. Staying organized and aware of the IRS schedule helps you avoid unnecessary penalties.

Key filing deadlines

• January 31:
  1099-NEC and 10-MISC forms must be sent to contractors and recipients, and submitted to the IRS.
• February 28:
  If filing 1099-MISC by paper, it must reach the IRS by this date.
• March 31:
  If filing electronically, this is the IRS deadline for both 1099-NEC and 1099-MISC.

Pro tip: File early and electronically when possible. It’s faster, more secure, and often easier to track.

Penalties for missing the mark

Failing to file on time — or filing with errors — can result in fines per form:

• Up to 30 days late: $60 per form
• More than 30 days late but before August 1: $120 per form
• After August 1 or not filed at all: $310 per form
• Intentional disregard: $630+ per form

Common mistakes that trigger penalties include:

• Missing or incorrect Taxpayer Identification Numbers (TINs)
• Filing the wrong form type
• Sending forms to the wrong address or agency
• Forgetting to submit the form to both the contractor and the IRS

Filing method matters

• If you issue 250 or more forms, you must file electronically
• For fewer forms, you can choose paper or electronic, but digital filing is strongly recommended

Best practices for tracking contractor payments

Staying organized throughout the year makes 1099 filing faster, more accurate, and less stressful. The right systems and habits can prevent tax season headaches and protect your business from costly errors.

Set yourself up for success

• Collect a W-9 upfront
  Before issuing any payments, request a completed W-9 from every contractor. This ensures you have the correct name, business structure, and Taxpayer Identification Number (TIN) on file.

Pro tip: No W-9, no payment. Make this your standard policy.

• Use reliable payment tools
  Digital platforms like PayPal, Venmo (business profiles), or direct deposit systems help create a clear audit trail. Avoid paying contractors in cash when possible — it’s harder to track.
• Keep detailed records
  Log every payment, including amount, date, and service performed. Track project hours or deliverables when relevant. Organize receipts, invoices, and contracts in one place.
• Leverage accounting software or a CPA
  Platforms like QuickBooks, Xero, or FreshBooks can automatically categorize and summarize payments made to each contractor. A professional accountant ensures nothing slips through the cracks.
• Use FareHarbor’s built-in reporting tools
  If your contractors receive tips or commissions through FareHarbor, pull end-of-year reports that show total earnings. This makes preparing 1099s easier and ensures accuracy.

Final thoughts

Handling 1099s correctly is not just about checking a box — it is about protecting your business, staying compliant with IRS rules, and maintaining strong contractor relationships.

With the right systems in place — from collecting W-9s early to tracking payments accurately — you can simplify the process and avoid last-minute stress. FareHarbor’s reporting features and other digital tools can make a major difference when tax time arrives.