So cleaning is one of the few industries where almost everybody runs both kinds of workers. W-2 employees on the regular routes, 1099 subcontractor crews for overflow, specialty work, or that big strip-and-wax job. Both are normal. What gets companies in trouble isn’t running both, it’s letting the two blur together in the books, so that by January nobody can cleanly say who was paid what, under which arrangement, with what paperwork behind it.

The wall between them

The structural rule is simple and I don’t bend it: wages and subcontractor payments never share an account. Employee pay runs through payroll into its own payroll expense accounts, with the taxes broken out. Subcontractors get paid as vendors into a separate contract labor account. It sounds like a small thing, right, but every messy file I’ve untangled where 1099 season went sideways started with those two streams sharing a bucket.

What to keep for W-2 employees

• Payroll records from your payroll service: pay stubs, tax withholdings, and the quarterly and annual filings it produces.
• Timesheets or the time records from your scheduling app, because hours are the source of truth wages get checked against.
• The hire paperwork on file, and pay rate changes written down when they happen, not remembered later.

Honestly, a decent payroll service does most of this for you, and I think the owner’s real job is just making sure the hours flowing in are right. Garbage hours in, garbage payroll out.

What to keep for 1099 subcontractors

• A W-9 from every subcontractor before the first payment, not chased down in January. You don’t know at the start of the year whose payments will end up large enough to report, so the W-9 gets collected regardless.
• Their invoices, kept and matched to your payments.
• Payments by check or ACH, so there’s a trail. Cash is legal but it’s how records die.
• The subcontractor agreement and, for commercial work especially, their certificate of insurance. Building managers ask, and so do auditors.

The January part

With the wall in place, year-end reporting is close to automatic, because the contract labor account already holds each vendor’s total. On the federal side, the reporting threshold for Form 1099-NEC changed recently: for payments made in 2026 and after, the form is required once you’ve paid a subcontractor $2,000 or more in the year, up from the old $600 rule that applied through 2025 payments. The figure is set to adjust with inflation in future years, and some states still run their own lower thresholds, so the specific numbers are worth confirming with your CPA each filing season. The recordkeeping doesn’t change either way. You keep the W-9s and track every vendor’s total, and the books hand your CPA the list.

Why this pays off beyond January

Clean separation also makes the management numbers honest. Subcontracted crews and employee crews cost differently and behave differently, and when each stream sits in its own account and every payment is tagged to its job, you can actually compare them. That’s the version of the books that helps you decide how to staff the next contract, which is kind of the whole point. If your workers and payments have already blurred together, that’s fixable, and it’s a normal part of a clean up. Reach out here and tell me what you’re running. If you have any questions, feel free to reach out. Hope this saves you a January.