When do I need to issue 1099s to my contractors?
The deadline is January 31. That applies both to sending the 1099-NEC to your contractors and to filing the forms with the IRS. There is no automatic extension for 1099-NEC filings, so this date is firm.
You need to issue a 1099-NEC to any person or business you paid $600 or more during the calendar year for services, as long as they are not a C corporation or S corporation. This includes independent contractors, freelancers, subcontractors, and most LLCs. Sole proprietors, partnerships, and single-member LLCs all need to receive one if they hit the $600 threshold. Payments for materials or products don’t count. It’s specifically for services rendered.
The most important thing you can do is collect a W-9 from every contractor before you pay them. The W-9 gives you their legal name, business name, tax identification number, and entity type. Without this information, you cannot prepare a 1099. Chasing contractors for W-9s in January when you’re trying to meet the deadline is stressful and often unsuccessful. People ignore emails, change phone numbers, or simply don’t respond. Get the W-9 before the first payment goes out.
If you pay a contractor by credit card or through a payment platform like PayPal, Venmo (business), or Square, you generally do not issue a 1099-NEC for those payments. The payment processor handles the reporting on a 1099-K instead. Payments by check, ACH, cash, or direct bank transfer are your responsibility to report.
Penalties for late or missing 1099s range from $60 to $310 per form depending on how late you file, with a maximum penalty that can reach over $1 million for larger businesses. Even if you’re a small operation with a handful of contractors, the penalties add up quickly if the IRS notices the gap.
Keep a running list throughout the year of every contractor you pay. Track the total amount paid and confirm you have a W-9 on file for each one. Waiting until January to figure out who you owe 1099s to means you’re reconstructing a year’s worth of payments under a tight deadline. Reviewing this quarterly takes five minutes and saves you a scramble later.
If your contractors also received payments from you for different types of income, like rent for example, that gets reported on a 1099-MISC instead of a 1099-NEC. The 1099-MISC has a different filing deadline of February 28 for paper filing or March 31 for electronic filing. But for straightforward contractor payments, 1099-NEC and the January 31 deadline are what matter.
Getting your small business tax returns right starts with accurate 1099 reporting. If the IRS sees your business claimed $80,000 in contractor expenses but you only filed 1099s for $30,000, that raises questions. Keeping clean records throughout the year makes January simple. If you have more than a few contractors, our 1099 preparation service handles the entire process so nothing falls through the cracks.
Greater Nashville's Trusted Financial Partner
The Next Step:
A Quick Conversation
Tell us about your business and where you need support. We'll listen, figure out what makes sense for your situation, and give you a straightforward quote.
More Questions
What's the penalty for paying employees late or filing payroll taxes late?
IRS penalties for late payroll tax deposits start at 2% and climb to 15%. Late filing penalties add 5% per month. Paying employees late creates separate legal exposure under state wage payment laws.
Read answerWhat's included in a monthly bookkeeping service?
A standard monthly bookkeeping service covers transaction categorization, bank and credit card reconciliation, and financial reporting. Some providers include additional services like bill payment or invoicing, so it's worth asking what's core and what costs extra.
Read answerHow long do I need to keep my business financial records?
Seven years is the safe default for most financial records. The IRS standard audit window is three years, but it extends to six or seven in certain situations. Asset records and legal formation documents should be kept even longer.
Read answerWhat happens if I don't file 1099s on time?
The IRS charges penalties for every late 1099, and the amount increases the longer you wait. Penalties range from $60 to $310 per form depending on how far past the deadline you file, and they can reach $630 per form if the IRS considers it intentional.
Read answerShould I use cash basis or accrual accounting for my business?
Most small businesses start with cash basis because it's simpler and offers more control over tax timing. Accrual gives a more accurate financial picture and becomes necessary as you grow, carry inventory, or seek outside funding.
Read answerHow do I handle bookkeeping for a dental practice?
Dental practice bookkeeping revolves around managing revenue from both patients and insurance companies, tracking detailed expense categories like lab fees and supplies, and reconciling your practice management software with your accounting system.
Read answer
