Hawaii 1099 Requirements: What Businesses Need to Know

If you hire independent contractors, freelancers, or other non-employee workers in Hawaii, you have reporting obligations that go beyond just the IRS. Hawaii is one of the states that requires its own copy of 1099 filings, and if you miss it, there are penalties at both the federal and state level. This guide covers everything Hawaii business owners need to know about 1099 requirements, from who gets one to the specific Hawaii wrinkles that catch people off guard.

This article builds on our Employee vs. Independent Contractor in Hawaii guide. If you’re unsure whether a worker should receive a 1099 or a W-2, start there first. The classification decision comes before the filing decision.

What Is a 1099 and Who Gets One?

A 1099 is an IRS information return used to report payments made to non-employees. Where a W-2 reports wages paid to employees, a 1099 reports income paid to independent contractors, freelancers, and other payees who are not on your payroll. The IRS uses 1099s to make sure income that isn’t subject to withholding still gets reported and taxed.

There are several types of 1099 forms, but the ones Hawaii businesses encounter most often are:

• 1099-NEC (Nonemployee Compensation): Used to report payments of $2,000 or more (2026+) to independent contractors, freelancers, consultants, and other non-employees for services performed. This is by far the most common 1099 for small businesses. Prior to 2026, the threshold was $600 prior to the 2026 OBBBA update.
• 1099-MISC (Miscellaneous Income): Used for rent payments of $2,000+ for 2026 under OBBBA, prizes and awards, legal settlements, and other miscellaneous payments that don’t fit into other 1099 categories.
• 1099-INT (Interest Income): Used to report interest payments of $10 or more. Less common for typical small businesses, but relevant if your business pays interest on loans or notes.

Who Must Receive a 1099-NEC?

You must issue a 1099-NEC to any individual, partnership, or LLC (not taxed as a corporation) that you paid $2,000 or more during the tax year (2026 threshold under OBBBA) for services. This includes:

• Freelance designers, developers, or consultants
• Subcontractors (e.g., a plumber your construction company hires)
• Accountants or attorneys (if sole proprietors or partnerships)
• Independent sales reps
• Any other non-employee service provider

You do not need to issue a 1099-NEC to C-corporations or S-corporations (with limited exceptions for legal and medical payments), or for payments made for merchandise, products, or freight.

Federal 1099-NEC Requirements

The 1099-NEC was reintroduced by the IRS starting with the 2020 tax year to replace Box 7 of the old 1099-MISC for reporting nonemployee compensation. Here are the key federal requirements:

Filing Threshold

Starting with 2026 payments (reported in early 2027), the threshold increased to $2,000 per year (up from the longstanding $600 prior to OBBBA) under the One Big Beautiful Bill Act (OBBBA). You must file a 1099-NEC for any non-employee to whom you paid $2,000 or more during the calendar year for services. The threshold applies to total payments over the entire year, not per invoice or project.

Filing Deadline

The federal deadline for filing 1099-NEC with the IRS and furnishing copies to recipients is January 31 of the following year. Unlike some other 1099 forms, there is no automatic extension for the 1099-NEC. If January 31 falls on a weekend, the deadline moves to the next business day.

How to File

• Paper filing: Submit Copy A of each 1099-NEC along with Form 1096 (the transmittal summary) to the IRS. Paper filing is only allowed if you’re filing fewer than 10 returns.
• Electronic filing: Required if you’re filing 10 or more information returns. E-file through the IRS FIRE (Filing Information Returns Electronically) system or an approved third-party service.
• Recipient copies: Provide Copy B to each contractor by January 31 as well. You can mail it or deliver it electronically if the recipient consents.

Hawaii State 1099 Filing

This is where many Hawaii businesses trip up. Unlike some states that rely solely on the IRS for information reporting, Hawaii requires that you file a copy of your 1099s directly with the Hawaii Department of Taxation (DoTax).

Combined Federal/State Filing Program

The good news: Hawaii participates in the IRS Combined Federal/State Filing (CF/SF) Program. If you e-file your 1099s with the IRS through an approved method, the IRS will automatically forward your Hawaii 1099 data to the Hawaii Department of Taxation on your behalf. This means you don’t have to file separately with the state — as long as you’re e-filing and your filing software supports the CF/SF program.

When You Must File Separately with Hawaii

If you file your 1099s on paper with the IRS, the combined filing program does not apply. In that case, you must separately submit the state copies to the Hawaii Department of Taxation with transmittal Form N-196. The state deadline is February 28 of the following year.

Hawaii W-2 and HW-2 Reporting

If you also have employees, Hawaii’s year-end wage reporting is separate from 1099s: Forms W-2 or HW-2 go to employees and to the Department of Taxation by January 31 (Form HW-3, the old annual reconciliation, has not been required since tax year 2020). The DoTax can cross-reference wage and contractor records, so make sure your year-end reporting is complete and consistent across all forms.

Hawaii GET and Contractor Payments

Here’s a uniquely Hawaiian wrinkle that mainland businesses moving to the islands rarely anticipate: Hawaii’s General Excise Tax (GET) can apply to contractor payments. We’ve seen this catch many new business owners off guard, and it intersects with 1099 reporting in important ways.

How GET Works with Contractors

Hawaii’s GET is a tax on gross business income — it’s not a sales tax, even though it’s sometimes treated like one. The rate is 4% plus a 0.5% county surcharge in every county, or 4.5% in total. When you pay an independent contractor, that contractor is responsible for paying GET on the income they receive from you. However, many contractors pass the GET through to you by adding it to their invoices.

What to Report on the 1099

When reporting contractor payments on a 1099-NEC, report the total amount you paid, including any GET passed through to you. If you paid a contractor $10,000 plus $450 in GET pass-through, the 1099-NEC should show $10,450. The IRS requires you to report the full amount paid, not the net-of-tax amount.

GET Licensing for Contractors

Every independent contractor doing business in Hawaii must have their own GET license. As a best practice, verify that your contractors have an active GET license before making payments. If a contractor doesn’t have a GET license and isn’t reporting their income, it can raise red flags during an audit that affect your business too.

For a deeper dive on GET, see our General Excise Tax for Employers guide.

W-9 Collection Practical Steps

The W-9 (Request for Taxpayer Identification Number and Certification) is the form you collect from each contractor before you make a payment. It gives you the contractor’s legal name, business name, tax classification, and TIN (usually their Social Security Number or EIN). Without a W-9 on file, you cannot accurately prepare a 1099.

When to Collect

Collect the W-9 before the first payment. In our experience, this is the single most important step. If you wait until year-end to collect W-9s, you’ll be chasing down contractors who may have moved, changed businesses, or simply don’t respond. Make the W-9 a required part of your contractor onboarding process: no W-9, no first check.

How Long to Keep W-9s on File

The IRS recommends keeping W-9s for at least four years after the last tax year in which the form was used for reporting. In practice, many accountants recommend keeping them for the full duration of your relationship with the contractor plus four years after the last payment.

What to Watch For

• Incomplete forms: Make sure every field is filled in, including the TIN and tax classification. A missing TIN means you may be required to withhold 24% of payments (backup withholding).
• Mismatched information: The name and TIN on the W-9 must match IRS records. If they don’t, the IRS will send you a B-Notice requiring you to get corrected information.
• Updated W-9s: If a contractor changes their business structure (e.g., from sole proprietor to LLC), request an updated W-9.

Common Mistakes Hawaii Businesses Make

We’ve seen these 1099 mistakes from Hawaii businesses more times than we can count. Here are the biggest ones and how to avoid them:

1. Not Collecting W-9s Upfront

This is the #1 mistake. You hire a contractor, they do great work, you pay them — and then in January you realize you don’t have their TIN. Now you’re scrambling to track them down, and if they don’t respond, you may have to file with backup withholding or face IRS penalties for incorrect returns.

2. Missing the Hawaii State Copy

Many businesses (and even some accountants unfamiliar with Hawaii) file 1099s with the IRS and assume they’re done. But Hawaii requires its own copy. If you’re e-filing through the CF/SF program, this is handled automatically — but if you’re paper filing or using software that doesn’t support combined filing, you need to submit to Hawaii Department of Taxation separately.

3. Forgetting GET on Contractor Payments

If you’re hiring contractors in Hawaii, both you and the contractor need to understand how GET applies. Contractors should be charging GET on their services, and you should be reporting the full payment (including any GET pass-through) on the 1099. Failing to account for GET properly can create discrepancies between your 1099 filings and the contractor’s GET returns.

4. Misclassifying Employees as Contractors

This is the most expensive mistake on this list. If you classify a worker as a 1099 contractor when they should be a W-2 employee, you’re exposed to back taxes, penalties, and interest from both the IRS and the Hawaii Department of Taxation, plus potential liability for unpaid benefits under Hawaii’s TDI and Prepaid Health Care Act. Hawaii takes misclassification seriously and audits for it. See our employee vs. contractor guide for the full breakdown.

5. Filing Late or Not Filing at All

The January 31 deadline is firm for 1099-NEC. There’s no automatic extension. Some businesses procrastinate because they’re still wrapping up year-end accounting, but the penalties for late filing add up quickly (see below).

6. Using the Wrong Form

Nonemployee compensation goes on the 1099-NEC, not the 1099-MISC. Since the 1099-NEC was reintroduced, some businesses still mistakenly use 1099-MISC for contractor payments. Using the wrong form can result in IRS notices and processing delays.

Deadlines and Penalties

Key Deadlines

• January 31: File 1099-NEC with the IRS (Copy A) and furnish copies to recipients (Copy B).
• February 28: Filing deadline for 1099-MISC and other 1099 variants if filing on paper (March 31 if e-filing).
• February 28: Hawaii state copies of 1099s with transmittal Form N-196 (paper filers not using the combined federal/state program). See our how to do payroll in Hawaii guide for complete year-end filing details.

IRS Penalties for Late or Missing 1099s

IRS penalties for returns due in 2026 are based on how late you file:

• Filed within 30 days of deadline: $60 per return
• Filed after 30 days but by August 1: $130 per return
• Filed after August 1 or not filed at all: $340 per return
• Intentional disregard: $680 per return with no maximum ($690 for returns due in 2027)

Small businesses (average annual gross receipts of $5 million or less) have reduced maximum penalties, but the per-return amounts still apply. If you have even a handful of contractors, these penalties add up fast.

Hawaii Department of Taxation Penalties

Hawaii Department of Taxation can impose its own penalties for failing to file state copies of information returns. Also, if the DoTax determines that you failed to report contractor payments as part of a pattern of non-compliance, it can trigger a broader audit of your GET filings, withholding tax returns, and worker classification practices.

When to Use a Payroll or Accounting Service

If you only have one or two contractors, you may be able to handle 1099 filing yourself using IRS Free File or a basic accounting tool. But for most Hawaii businesses, the combination of federal filing, Hawaii state filing, GET tracking, and W-9 management makes professional help well worth the cost.

Consider using a payroll or accounting service if:

• You have five or more contractors receiving 1099s
• You’re unsure whether your filing software handles the Hawaii state copy
• You have workers who might be misclassified and want a professional review
• You want help tracking GET obligations on contractor payments
• You’ve received IRS B-Notices about mismatched TINs
• You simply don’t want to deal with the year-end paperwork and deadlines

A good payroll service like Gusto will handle W-9 collection, 1099 preparation, IRS e-filing, Hawaii state filing, and deadline tracking, all in one package. For Hawaii businesses, this eliminates the risk of missing the state filing requirement and keeps your contractor records organized year-round.

Tracking contractor payments throughout the year and issuing accurate 1099s at year-end is part of the service a Hawaii payroll and bookkeeping service provides, so you’re never scrambling in January.

Frequently Asked Questions

Who must receive a 1099-NEC from a Hawaii business?

Any unincorporated contractor, freelancer, or sole proprietor paid $2,000 or more for services during 2026 ($600 or more for 2025 payments) must receive a 1099-NEC. This includes payments for professional services, repairs, cleaning, and other non-employee compensation. Payments to corporations are generally exempt, with exceptions for attorneys and certain medical providers.

Does Hawaii have its own 1099 filing requirements separate from federal?

Yes. Hawaii requires a state copy of your 1099s. Hawaii participates in the IRS Combined Federal/State Filing (CF/SF) program, so 1099s e-filed with the IRS through CF/SF are forwarded to Hawaii. If you file on paper, send the state copies to the Hawaii Department of Taxation with transmittal Form N-196 by February 28. The Department does not accept 1099s filed electronically directly with the state.

What is the deadline for filing 1099s in Hawaii?

The 1099-NEC must be furnished to recipients by January 31 and filed with the IRS by January 31. Hawaii state copies (with Form N-196) are due to the Hawaii Department of Taxation by February 28, unless they reach Hawaii through the IRS Combined Federal/State Filing program.

Does a Hawaii business need to file 1099s for payments to LLCs?

It depends on how the LLC is taxed. Single-member LLCs taxed as sole proprietors and multi-member LLCs taxed as partnerships require 1099s when payments reach $2,000 or more in 2026 ($600 for 2025 payments). LLCs taxed as S-corps or C-corps are generally exempt. Always check the W-9 the vendor submits to confirm their tax classification.