Everything you need comes from one form: the W-9. Have every contractor fill one out before you make your first payment to them. The W-9 collects the legal name of the individual or business, any trade or “doing business as” name, the mailing address, the federal tax classification (sole proprietor, LLC, S-corp, partnership, etc.), and most importantly, the taxpayer identification number. That TIN is either a Social Security Number for individuals or an Employer Identification Number for businesses.

The tax classification matters more than people realize. If a contractor is structured as an S-corporation or C-corporation, you generally don’t need to issue them a 1099-NEC at all. Sole proprietors, single-member LLCs, and partnerships that receive $600 or more during the year do require one. Without the W-9 on file, you won’t know which category a contractor falls into.

Collect the W-9 before you pay, not in January when 1099s are due. Chasing contractors for their information after the fact is one of the most common and avoidable headaches in small business bookkeeping. Some contractors are slow to respond, some change their phone number, and some disappear entirely after a job is done. If you wait, you risk missing the January 31 filing deadline.

Keep a simple system for this. A shared folder, a spreadsheet tracking who has submitted a W-9, or a note in your accounting software. When you onboard a new vendor or subcontractor, make the W-9 part of the process before any work starts. It takes two minutes and saves hours of frustration later.

If a contractor refuses to provide a W-9, the IRS requires you to withhold 24% of their payments as backup withholding. Most contractors will hand over the form once they understand that alternative.

You also need accurate payment totals for the calendar year. Your bookkeeping records should track payments to each contractor individually so you can report the correct amount on the 1099-NEC. If payments are spread across multiple accounts or paid partially in cash, make sure everything is captured. The IRS matches what you report against what the contractor reports on their return, so the numbers need to agree.

If you have a handful of contractors or more, 1099 preparation is worth handing off to someone who handles the filing, formatting, and submission to the IRS and state. The penalties for filing late or with incorrect information start at $60 per form and go up from there depending on how late the correction happens. Getting ahead of it with clean W-9s and accurate records makes the whole process straightforward.