Everything You Need to Know About 1099s Before January
If you pay contractors, freelancers, or service providers in your business, January can sneak up fast. And nothing causes more stress for business owners than realizing they need to send 1099s but don’t have the right info, the right forms, or the right deadlines.
The good news is that 1099s are simple once you understand a few key rules. This guide will walk you through what counts, who needs a form, what information you must collect, and how to stay compliant without the last-minute panic.
By the end, you’ll know exactly what to do and how to avoid IRS penalties before January arrives.
What Is a 1099 and Why Does It Matter?
A 1099 is a tax form used to report payments made to non-employees.
If you hired someone for work and did not put them on payroll, the IRS wants to know about it.
You’ll most commonly file a 1099-NEC for contractor payments. The form reports how much you paid them during the year so they can report that income on their taxes.
Failure to file can lead to penalties that range from small fines to thousands of dollars, depending on how late the form is. It’s much easier (and cheaper) to handle this correctly the first time.
Who Needs to Receive a 1099?
You must send a 1099-NEC to anyone who meets all three of these requirements:
They performed a service for your business.
They were not an employee.
You paid them $600 or more during the year.
This includes:
Freelancers and contract workers
Graphic designers
Consultants
Bookkeepers or accountants (if not a firm)
Social media managers
Web developers
Virtual assistants
Real estate photographers and stagers
Payments that do NOT require a 1099
You do not issue a 1099 if:
You paid the contractor through PayPal, Venmo, Stripe, or credit card
You paid a C-corporation or S-Corporation (with a few exceptions like attorneys)
The total paid was under $600
The payment was for goods, not services
Most contractors paid through third-party platforms will receive a 1099-K from the payment processor instead, so you don’t have to send one.
The Most Important Step: Collect W-9s Early
The biggest 1099 headache every year comes from missing information.
The easy fix is to collect a W-9 form from every contractor before they start working for you.
A W-9 provides:
Legal name
Business name (if applicable)
Address
Tax classification
EIN or Social Security Number
Without a W-9, you cannot file a 1099 correctly.
If you wait until January to request W-9s, you’ll spend hours chasing people down and delaying filings. This is why bookkeepers collect W-9s as part of the onboarding process.
What Information You Need Before Filing
To file 1099s correctly, make sure you have the following:
Total payments made to each contractor
The contractor’s full legal name
Their TIN or EIN
Their mailing address
Your business information
Your own EIN
If your bookkeeping is clean and updated monthly, this step is easy.
If your books are messy, you may need to review all payments manually — and that’s where business owners get stuck.
When Are 1099s Due?
There are two deadlines to remember:
January 31
This is the deadline to send 1099-NEC forms to your contractors and to file them with the IRS.
There are no extensions for 1099-NEC filings.
Missing this deadline results in penalties that increase the longer you wait.
How to File Your 1099s
You have a few simple options:
Use an online filing service
Tools like TaxBandits, Track1099, or QuickBooks let you:
Create forms
File electronically
Mail copies to contractors
This is the easiest method for small businesses.
Use your bookkeeping software
QuickBooks Online allows you to prepare and file 1099s automatically if your books are set up properly.
Have your bookkeeper or accountant file them for you
This is the best option if you want to avoid mistakes and penalties.
Common 1099 Mistakes to Avoid
Here are the errors business owners run into most often:
Waiting until January to collect W-9s
Failing to track contractor payments
Filing a 1099 for someone paid through PayPal or credit card
Missing the January 31 deadline
Using the wrong contractor information
Not reconciling transactions before filing
These are the mistakes that cause IRS letters and late fees — and they’re all avoidable.
How to Stay 1099-Ready All Year
The simplest way to prevent January stress is to build a system that tracks contractors properly from day one.
Here’s what that looks like:
Collect a W-9 before sending the first payment
Keep contractor records organized in QuickBooks
Categorize all payments accurately
Review accounts monthly so payments stay up to date
Store digital copies of receipts and invoices
If this feels overwhelming, it’s exactly what a bookkeeper handles behind the scenes.
Final Thoughts
1099s don’t have to be stressful. If you stay organized, collect W-9s early, and keep your books accurate throughout the year, January becomes just another month — not a mad scramble.
If you want someone to handle your contractor tracking, W-9s, and 1099 filings so you never deal with IRS penalties again, I’ve got you covered.
Red Leaf Bookkeeping helps small business owners file 1099s correctly and stay tax ready all year long.
👉 Book a Money Clarity Call to get your 1099s handled the right way.