Tips for 1099s
When I say, “January 31st,” does a shiver run down your spine? Do your hands shakily and involuntarily move toward the phone and begin to dial vendors’ numbers? Do you find yourself curled up in the fetal position in your work van or under your office desk? If so, you could be suffering from tenninetynineophobia. What is that, you ask?? Well, it’s a word we just made up.
But the truth is that fear of 1099s is real. Well, uneasiness is real. Well, certainly confusion exists.
Fear not, Good Friends and People We’ve Never Met! We have experienced that fear, uneasiness, and confusion. It motivated us to make a plan and now we sleep easily, our hands no longer move involuntarily, and we find ourselves in the fetal position much less often. We’re here to share the plan with you!
What are 1099s?
They are tax documents.
If you have ever filed US taxes, you’ve probably received them.
If you have a savings account that pays interest, you may have received a 1099-INT.
If you have an investment account that pays dividends, you may have received a 1099-DIV.
If you’ve done contract work for a business, then you may have received a 1099-NEC.
These are just examples. There are many kinds of 1099s.
Why do I care?
Well, you’re here, so you do.
Sorry, that was snarky, but to be fair…so was your question. Let’s move on. We’re both professionals.
If your business pays for rent, services, or royalties, you might need to issue 1099s each year.
Our clients often need to issue 1099-NECs to independent contractors that they’ve hired for services.
Independent contractors are different than employees. The 1099-NEC is for “non-employee compensation.” In other words, employees’ income is reported on W-2s, but contractors’ income is reported on 1099-NECs.
If you pay lawyers, you may need to report your payments to them on 1099-MISC or 1099-NEC, depending on the purpose for which the payment was made.
If you pay rent, you may need to report it on a 1099-MISC.
Small business owners are responsible for issuing 1099s by January 31st each year. They must be sent to contractors and filed with the IRS.
To issue 1099s, you’ll need W-9s from your vendors.
What are W-9s?
They are documents that give you information about vendors. They include vendor names, ID numbers, business structure information, and more.
You should collect one from each vendor you pay.
You keep these documents on file, but you do not need to send them to the IRS.
Vendors should be used to giving out their W-9s. In fact, most have them readily available to send. If they don’t, you can send them this fillable Form W-9. It takes about 2 minutes to complete.
If vendors refuse to give you a W-9, they may be subject to backup withholding, which you may be responsible for implementing.
This backup withholding complication is one of the reasons that you should have a W-9 policy (described in the Tips section below).
The Problem:
The rules for issuing 1099s are confusing.
I mean, just count the number of times I typed “may” and “might” and “probably” so far on this page.
The 1099 instructions are lengthy with lots of “if-then-unless” phrases. You can read them here: Instructions for Forms 1099-MISC and 1099-NEC.
They depend on:
how MUCH you pay each vendor (see new threshhold info below),
HOW you pay them (Venmo vs Zelle vs check vs ACH),
what you buy (goods vs services),
the vendor’s business structure (LLC vs Corporation)
and more!
Also, the rules change, because…government.
Speaking of which, did you know that the threshhold for 2026 has been increased to $2,000 from $600? (IRS Publication 1099 (2026)).
So, after you’ve finished toasting the New Year,
and you’re busy making resolutions to hit the gym more often,
and just before they crumble into broken resolutions,
and just when you’re ready to wrap up your prior year books to beat the tax-rush at the CPA’s office,
and just before you need to pay your Annual Report dues,
January 31st jumps out at you like the relative that has overstayed their Holiday welcome - the one you forgot was still in the house, but greets you in YOUR bathrobe at the breakfast table with weird hair, eating the last of grandma’s famous banana bread.
So, if you’re in the fetal position now, feeling a touch of tenninetynineophobia, read on, sweet Reader. I offer you free hope! …
Tips:
Go back and read the paragraphs above if you skipped down to the “Tips” heading. You won’t be sorry…it’s mildly funny!
Make a W-9 policy and communicate it clearly to anyone at your business who will pay vendors.
The policy should include the following: Before paying ANY vendor for work, collect their W-9. If they refuse to give you one, then do not engage that vendor’s services.
Determine a central location to file and store all W-9s. These forms should be kept with your business tax documents.
On January 1st, begin determining which vendors have met the requirements for issuing 1099s. On this date, you will have made all of the prior year payments, so you can get a final year total for each vendor.
Send 1099s as soon as possible in January. If you use a 1099 filing website, be aware that they get crowded and bogged down toward the end of the month. Also, it takes a couple of days for the websites to file, and you do not want to miss the deadline.
What next?
Take a deep breath. Uncurl. Make a cup of tea in a room away from that holiday guest who is wearing your bathrobe.
You now have a plan.
You have a policy.
You’re ahead of the game.
Want help with all of the stuff above? That’s a service we offer. Contact us!
Photo by Kobby Mendez on Unsplash (Note that the photo has nothing to do with this blog, but those donuts looked delicious and 1099 photos do not). Thanks, Kobby - I hope you ate those donuts after the photo!