If your business pays contractors, 1099 season is already underway. The forms are due to both recipients and the IRS by February 2, 2026, and that deadline is firm. Late filings trigger penalties that scale fast—from $60 per form to as much as $680 per form for intentional disregard.
The work that determines whether filing goes smoothly happens now, not in late January. Clean W-9 data, accurate payment totals, and correct form selection all need to be in place before you start generating forms. Wait until the deadline approaches, and you’ll be chasing missing taxpayer IDs while the clock runs down.
This checklist walks your AP team through every step required before January—what to collect, what to verify, and what to file. Work through it in order, and you’ll head into filing season with clean data and no surprises.
What documents does your AP team need before filing 1099s?
Start with the foundation: a completed W-9 for every contractor you paid. The W-9 gives you the legal name, address, and taxpayer identification number you need to complete each 1099-NEC. Without it, you can’t file accurately—and you may be required to withhold tax from the contractor’s payments.
Collect a W-9 from each contractor before you pay them. This is the single most important habit for a clean filing season. A W-9 collected upfront confirms the contractor’s TIN and verifies whether they’re subject to backup withholding. A W-9 chased down in January slows everything else to a crawl.
Here’s what to gather and confirm before you generate any forms:
W-9 forms — collect a signed, current W-9 from every contractor paid during the calendar year.
Taxpayer identification numbers — confirm each TIN matches the contractor’s legal name on file.
Payment totals — pull the full amount paid to each contractor across the calendar year, January 1 to December 31.
Business details — verify your own EIN, business name, address, and phone number are accurate.
Track payments over the calendar year even if your business runs on a different fiscal year. A corporation with a June-to-May fiscal year still reports contractor payments based on the January-to-December calendar.
Who needs a 1099-NEC, and what’s the $600 threshold?
You must file Form 1099-NEC for any independent contractor or service provider you paid $600 or more during the 2025 tax year. The rule applies broadly—it covers freelancers, but also landscapers, repair companies, accountants, and any individual or business that provided services to your company.
A few exceptions remove the filing requirement:
Credit card and third-party payments — if you paid through a credit card or a processor like PayPal, you don’t issue a 1099-NEC.
Corporations — most corporations are exempt, with two key exceptions.
Attorneys and healthcare providers — these are never exempt, even when they operate as corporations. If you pay for their services, you file.
One planning note worth flagging now: the $600 threshold applies through the end of 2025. For the 2026 tax year, the threshold rises to $2,000. For this filing season, $600 remains the line.
How is 1099-NEC different from 1099-MISC?
Form 1099-NEC reports non-employee compensation—payments for services performed by freelancers, contractors, and other service providers. Most contractor payments belong here.
Form 1099-MISC reports a different set of payments. Use it for:
Medical and healthcare payments
Settlements paid to attorneys — though payments to attorneys for their services still go on the 1099-NEC.
Both forms share the same February 2, 2026 deadline, the same penalty schedule, and the same withholding rules. The only difference is the type of payment each one reports. Separate your payment data by category now so you generate the right form for each recipient.
How do you complete and file Form 1099-NEC?
Completing the form is straightforward once your data is clean. Each 1099-NEC requires:
Your business information — name, address, and phone number in the payer’s box at the top left.
Your tax ID — your business EIN, or your personal tax ID if you don’t have one.
The recipient’s tax ID — an individual TIN or a business EIN, depending on the entity you paid.
The recipient’s name and address — pulled directly from their W-9.
Total non-employee compensation — the full amount paid during the year, entered in box 1.
In most cases, that’s all you need: your information, the recipient’s information, and the total in box 1. Tax withheld in boxes 4 through 7 applies only in the rare cases where backup withholding was required.
On filing methods, the form count decides your options. If you have more than 10 1099-NEC forms, you must e-file. With 10 or fewer, you can e-file or mail. E-filing through a service that validates data before submission flags missing fields and formatting errors before the IRS accepts the file—so you fix problems upfront instead of managing rejections and corrections after the deadline.
How do you avoid the most common 1099 penalties?
Most penalties trace back to a small number of preventable mistakes. Address these before January, and you remove the risk:
Classify workers correctly — misclassifying an employee as a contractor exposes you to back taxes, penalties, and even criminal charges. Confirm each worker’s status before filing.
Collect W-9s before payment — a W-9 in hand gives you the correct TIN and confirms whether backup withholding applies.
Withhold when required — withhold federal income tax at a flat 24% if a contractor provides an incorrect TIN, their W-9 shows backup withholding, or you receive an IRS notice. Skip required withholding, and you may be liable for the tax yourself.
File on time — submit by February 2, 2026, to avoid both IRS penalties and frustrated contractors.
The penalty schedule rewards early filing and punishes delay. For 2025 forms, the cost climbs with each stage:
$60 per form if you file up to 30 days late.
$130 per form if you file 31 or more days late but before August 1, 2026.
$340 per form after August 1, 2026.
$680 per form for intentional disregard.
Validate taxpayer IDs upfront rather than discovering mismatches after you file. TIN matching catches errors before submission, which keeps you out of the correction cycle and away from B-Notices.
Your pre-January action plan
Filing season runs smoothly when the prep work is done early. Here’s the sequence to complete before January begins:
Audit your W-9s — confirm you have a current, signed W-9 for every contractor paid $600 or more.
Validate TINs — match each taxpayer ID against the contractor’s legal name to catch errors now.
Reconcile payment totals — pull calendar-year totals for each recipient and confirm they cross the $600 threshold.
Sort by form type — separate 1099-NEC payments from 1099-MISC payments so each recipient gets the right form.
Confirm your filing method — if you have more than 10 forms, prepare to e-file; choose a system that validates data before submission.
Work the checklist in order, and your AP team enters January with verified data and a clear path to the February 2 deadline. The teams that file without stress are the ones that did the data work in December, not the ones racing to fix problems at the last minute.
1099Pro Cloud, Powered by Sovos solves all compliance issues for AP teams by streamlining 1099 reporting for businesses. With built-in TIN matching, an easy 3-step workflow, print & mail and eDelivery options for your receipits, 1099Pro Cloud makes end-to-end reporting a January-only process. Get started with your 7-day free trial today.
Frequently asked questions
When is the 1099-NEC deadline for the 2025 tax year?
The deadline is February 2, 2026, for both recipient copies and the IRS submission. The deadline is normally January 31, but it moves to the next business day because January 31, 2026 falls on a weekend. The IRS does not grant extensions for this form.
Do I need to file a 1099-NEC for payments under $600?
No. For the 2025 tax year, you only file when you pay a contractor $600 or more. Starting with the 2026 tax year, that threshold rises to $2,000.
Do I have to issue 1099-NECs to corporations?
Usually no, but there are two exceptions. You must issue a 1099-NEC to attorneys and to medical or healthcare providers for their services, even when they operate as corporations.
What happens if a contractor gives me an incorrect W-9?
You must withhold federal income tax from their payments at a flat 24%, and potentially state income tax depending on your state’s rules. The safest approach is to confirm correct W-9 information before you make any payments.
Do I need to file a 1099 for an overseas contractor?
No. You don’t file a 1099 for a foreign contractor unless that person performs work inside the United States or is a U.S. citizen living abroad.
Can my AP team file 1099s without an accountant?
Yes. Your team can prepare and e-file 1099-NEC forms in-house, especially with software that validates data and handles e-filing. If your situation is complex or your volume is high, an accountant or a dedicated filing platform reduces the risk of errors.
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