Most founders either over-build this (200 accounts nobody uses) or under-build it (everything in "miscellaneous"). Here's the middle.
The five account types
- Assets — what you own (bank, receivables, equipment)
- Liabilities — what you owe (cards, loans, deferred revenue)
- Equity — owner's stake and retained earnings
- Income — revenue streams
- Expenses — costs, grouped how you actually think about them
The detail rule
One account per decision you make, not per transaction type. You want "Software" — not separate lines for every SaaS tool. Enough granularity to answer real questions, little enough to stay readable.
Common mistakes
- Separate accounts for things you'll never analyze separately
- A giant "Miscellaneous" that hides real patterns
- Mixing owner draws into expenses (they're equity, not costs)
- Never revisiting it as the business changes
The bottom line
Five types, one account per decision, mapped to your tax lines. We build the COA to your business and keep it clean — the foundation under every report you'll ever run.
Books built on a shaky foundation?
We'll restructure your chart of accounts so reporting and tax filing finally run themselves.
See Bookkeeping Get a free quoteIf your business pays US contractors, three obligations follow you all year.
1. Collect a W-9 before you pay
Get a signed W-9 from every US contractor before the first payment. It gives you their legal name and TIN — the two things you need at filing time. Chasing W-9s in January from contractors who've moved on is how deadlines get missed.
2. Issue 1099-NEC on time
You report nonemployee compensation on Form 1099-NEC once payments to a contractor cross the reporting threshold for the year (historically $600; recent legislation raises it for payments made after 2025 — check the current figure when you file). The form goes to the contractor and the IRS by January 31.
- Payments to corporations are generally exempt (attorneys excepted)
- Payments made by credit card or through platforms like PayPal business are reported by the processor on 1099-K instead — don't double-report
- Foreign contractors working outside the US get a W-8BEN, not a 1099
3. Make sure they're actually contractors
The IRS looks at behavioral control, financial control and the relationship. Set their hours, provide the tools, make them exclusive — and you may have an employee, with back payroll taxes and penalties to match. When in doubt, run the facts past a professional before the relationship hardens.
The bottom line
W-9 up front, 1099-NEC by January 31, and honest classification. MOREOFTAX handles contractor reporting, payroll setup and classification reviews as part of bookkeeping and tax plans.
Contractor reporting handled for you
W-9 collection, January 1099 filings and classification checks — bundled into our bookkeeping plans.
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