If your business pays independent contractors, you probably owe them, and the IRS, a Form 1099-NEC every January. The form itself is short. What makes it stressful is chasing missing contractor details in the last week of the month. Here is what to know and what to do now.
What Form 1099-NEC reports
Form 1099-NEC reports nonemployee compensation: payments you make in the course of your business to people who are not your employees, such as freelancers, consultants and independent contractors. It is due to both the contractor and the IRS by January 31 for payments made in the previous calendar year.
A form is required once your total payments to a contractor for the year reach the reporting threshold. That threshold was $600 for many years; recent federal legislation raised it for payments made from 2026 onward. Confirm the current figure with your tax advisor before you file.
Who usually does not get one
- Employees, who get a Form W-2 instead.
- Most corporations (C corps and S corps). One notable exception: payments to attorneys are generally reportable even when the law firm is incorporated.
- Payments you made by credit card or through platforms like PayPal. Those are reported by the payment processor on Form 1099-K, not by you.
What to collect now, not in January
The single best habit is to get a completed Form W-9 from every contractor before you pay them for the first time. The W-9 gives you their legal name, tax classification and taxpayer identification number, which is everything you need to file.
- Review your vendor list and flag everyone who is an individual, sole proprietor, partnership or LLC taxed as one.
- Request W-9s from any flagged vendor you don’t have one for.
- Make sure contractor payments are categorized consistently in your books, so year-end totals are easy to pull.
Why late filing gets expensive
The IRS charges a penalty per form for filing late, missing information or incorrect details, and the amount rises the longer you wait. With several contractors, small mistakes add up quickly, which is why a clean vendor list in the autumn matters more than speed in January.
How we handle it for clients
For bookkeeping clients, we track W-9s through the year, flag reportable vendors as they are paid, and prepare and file 1099s as part of our Year-End & 1099 Package, with a second reviewer checking every form before it goes out.
This article is general information, not tax, accounting or legal advice. Every business is different. Book a free discovery call and we’ll look at your situation.
