Jingle all the Way into 1099 Season

(Without the Holiday Meltdown)

You know that perfect moment in late December when the world feels soft and twinkly? The lights are glowing, the email inbox has slowed to a gentle simmer, and for one blissful week you can almost convince yourself that business ownership is… peaceful.

And then comes January.

Suddenly the holiday cheer jumps off a cliff and you’re standing at the bottom wearing fourteen hats: CEO, HR director, customer service lead, chief motivator, part-time therapist, inventory wrangler, and now - like clockwork - the person responsible for making sure every contractor you paid last year gets a 1099.

It’s not glamorous. It’s not festive. No one writes carols about it.

But 1099 season shows up every single year, right on schedule, with all the charm of a surprise root canal.

The problem for most small to mid-sized businesses isn’t the 1099s themselves. It’s the timing. January is already jam-packed with year-end reviews, closing the books, tax prep, staffing issues, and the general “getting-the-business-back-in-gear” chaos. Add in the scramble to track down contractor info, verify totals, and meet IRS deadlines, and suddenly you’re starting the year in full sprint mode.

But here’s the good news: 1099 season doesn’t have to ambush you.

A little preparation now, in these final weeks before the ball drops, can save you hours, hundreds of dollars in penalties, and the kind of stress that makes you consider living off-grid. This guide walks you through everything you need to do, step-by-step, so that when January rolls in, you’re ready for it. No chaos. No crisis. Just clean numbers, complete forms, and a surprisingly calm start to the year.

Let’s turn this annual compliance chore into something that feels manageable… maybe even satisfying, if you’re the type who enjoys checking big tasks off your list.

Ready? Let’s make 1099 season a whole lot easier.

What Counts as a 1099 Contractor? (And Why the IRS Cares)

Before we dive into deadlines and paperwork, let’s back up and make sure we’re talking about the right people. Not everyone you pay gets a 1099, and not everyone who thinks they’re a contractor actually qualifies as one.

At its core, a 1099 contractor is someone you paid for services who is not your employee. That means you didn’t put them on payroll, you didn’t withhold taxes, and you didn’t offer benefits or PTO, even though you may have wished you could bribe them with a vacation day during your busiest week.

The IRS's Favorite Question: Who Controls the Work?

The easiest way to think about classification is this:

• Employees: You control how the work is done.
• Contractors: You control the result, but they decide how to get there.

If you’re telling them when to show up, what equipment to use, how many hours to devote to your project, or if you’re training them like part of your team, the IRS starts raising an eyebrow. Contractors run their own business, even if that “business” is one very busy person with a laptop and a dream.

Who Typically Falls Into the Contractor Bucket?

For small to mid-sized businesses, this usually includes:

• Graphic designers, web developers, and marketing specialists
• Outsourced bookkeepers
• IT consultants
• Copywriters and content creators
• Freelance sales reps
• Maintenance or repair technicians
• Photographers, videographers, editors
• Coaches and specialty trainers

If they operate independently, invoice you for services, and control how they deliver those services, you’re in contractor territory.

Why Classification Matters More Than You Think

The distinction isn’t just paperwork nuance. Misclassifying an employee as a contractor can trigger:

• Back taxes
• Penalties
• Required repayment of wages or benefits
• A very unpleasant letter from the IRS or your state tax agency

Accurate classification ensures you’re issuing 1099s to the right people and avoiding trouble with the wrong ones.

Your Quick Litmus Test

If you're still unsure, ask yourself:

• Do they work for multiple clients?
• Do they use their own tools or equipment?
• Can they decline work?
• Do they decide their own schedule and methods?

If the answer is mostly yes, they’re likely a contractor. If not, they may belong on payroll.

Now that we’ve sorted out who truly qualifies, let’s move into the part of 1099 prep that separates the organized from the overwhelmed: collecting W-9s before they disappear into the January witness protection program.

W-9 Collection: Your First Line of Defense

If 1099 season had a superhero, it would be the humble W-9 form. It doesn’t wear a cape. It doesn’t have a theme song. But it will save your January.

A W-9 is the form where your contractor provides their legal name, business name (if different), address, and taxpayer identification number (TIN or EIN). In other words, it’s the exact information you need to issue a correct 1099. Without it, you’re basically guessing — and the IRS does not reward guesswork.

Why Collecting W-9s Early Matters

Contractors are notoriously hard to track down in January. They’re busy. They’ve moved. Their inbox exploded. Or they just vanished into the new-year ether like all those people who swear they’re “definitely a morning person now.”

When you collect the W-9 before the first payment, you eliminate 90 percent of the January scramble.

The Golden Rule: No W-9, No Payment

This may feel strict, but it’s a lifesaver:

Don’t pay a contractor until they’ve submitted a completed W-9.

If you’ve ever tried to retrieve paperwork after money has left your bank account, you know exactly why this rule exists. The motivation to respond drops dramatically the moment the payment clears.

How to Handle Missing or Incorrect W-9s

Sometimes you inherit contractors you didn’t onboard. Or you find out a vendor’s information changed. Or your predecessor kept records in the infamous “I’ll remember where I put this later” pile.

In those cases:

• Reach out immediately
• Confirm the name matches IRS records
• Double-check whether they operate as an individual or a business entity
• Make sure the address is current
• Verify the TIN/EIN for accuracy

If something looks off, like a name that doesn’t match the EIN type, it’s better to fix it now than after you get a nasty IRS letter.

What If a Contractor Won’t Provide a W-9?

Ah yes, the “I’ll get it to you soon” crowd. In that case, you have two choices:

1. Pause payments until they comply (highly effective).
2. Begin backup withholding, which means you withhold a percentage of their payment and remit it to the IRS.

This isn’t your punishment, it’s the IRS’s. Backup withholding exists because the IRS would really like to know who you’re paying, and if the vendor won’t cooperate, they pass the responsibility to you.

Most contractors suddenly become very motivated after hearing the words “backup withholding.”

Store W-9s Securely

W-9s contain sensitive information. That means:

• No stacking them on a random desk
• No tossing them in a general “files” folder
• Definitely no emailing them around to your team like a holiday cookie recipe

Use a secure storage method. (Many businesses rely on their accounting team for this - and yes, we’re very good at making sure W-9s don’t mysteriously vanish.)

With W-9s collected and organized, you’re not just ahead of 1099 season, you’re practically winning it. Now it’s time to get into the rules that determine who actually needs a 1099 from you.

Understand the 1099 Threshold Rules

Once your W-9 collection game is strong, the next big question becomes: Who actually needs a 1099?

Not everyone you paid will get one, and not every payment qualifies, which is great news, because no one is trying to file more paperwork than necessary.

Here’s the breakdown in plain English.

The Famous $600 Rule

If you paid $600 or more to a contractor during the calendar year for services, you generally must issue a 1099-NEC.

This includes:

• Labor or service-based work
• Independent contractors
• Freelancers
• Consultants
• Agencies or businesses that are not corporations

Important note: It’s the total for the year, not per invoice. Three $250 invoices still get you past the threshold.

1099-NEC vs 1099-MISC (Made Simple)

There are a few types of 1099s, but let’s focus on the two you’ll actually use:

1099-NEC (Non-Employee Compensation)
Used when you:

• Pay someone $600+ for services
• Pay directly (not via payroll or a platform like PayPal in certain cases)
• Pay a person or business entity that isn't a corporation (with exceptions)

1099-MISC
Used for miscellaneous payments such as:

• Rent
• Royalties
• Payments to attorneys (yes, even if they’re incorporated)
• Prizes or awards
• Medical or healthcare provider payments

Think of the NEC form as your default for contractor payments, while the MISC form handles the outliers.

Payments That Don’t Require a 1099

Here are the people and payments you get to skip:

• Corporations (with a few exceptions)
• Payments made by credit card or third-party processors - those platforms handle their own reporting
• Product purchases
• Rent paid to a property management company that’s a corporation
• Employee wages (those belong on W-2s)

Also, you don’t issue a 1099 to:

• LLCs taxed as S Corps or C Corps
• Vendors who provided goods, not services
• International contractors without U.S. tax obligations

But keep those W-9s anyway, you need the classification confirmed.

The Big Exceptions You Should Never Forget

A few cases always require a 1099, regardless of corporate structure:

• Attorney fees
• Medical and healthcare payments
• Certain payments to landlords

Law firms and healthcare providers don’t get to skip the fun just because they have “Inc.” in their name.

What If You’re Not Sure Whether Someone Should Receive a 1099?

Here’s the rule to live by:

When in doubt, collect the W-9 and keep them on your list until you confirm.

Contractor payments can cross the $600 threshold faster than you expect, especially if you're working on multiple projects or paying multiple installments.

Doing this detective work now - while the year isn’t fully closed - will save you a world of stress later.

Red Flags and Common Mistakes to Avoid

If 1099 season had a blooper reel, these mistakes would be the star performers. Fortunately, most of them are easy to avoid once you know what to look for. And avoiding them is more than just a point of pride, it helps prevent delays, rejects, and unwelcome letters from the IRS.

Mistake 1: Waiting Until January to Start Anything

January is already busy. If you add “track down six contractors, find their W-9s, verify addresses, reconcile vendor totals, and learn the meaning of backup withholding” to that list, you’re basically inviting chaos to move in and raid your pantry.

Starting now means January becomes review and file, not search, panic, correct, then file.

Mistake 2: Forgetting to Collect W-9s

This is the most common and the most preventable. Without a W-9, you’re missing:

• Legal names
• Accurate TIN/EIN
• Current address
• Entity classification

If any of those are missing or wrong, your 1099 may get flagged. And if you pay a contractor without a W-9 on file, you may also be responsible for backup withholding. The IRS loves a good backup withholding moment.

Mistake 3: Mixing Up Legal Names and Trade Names

Here’s a classic:
You enter “Mike’s Magic Landscaping” on the form… but “Mike” actually filed for taxes under “Michael Rodriguez, LLC.”

The name must match IRS records exactly. Even a small mismatch can cause a notice. And if there’s one thing we want to avoid this year, it’s surprise mail from the IRS.

Mistake 4: Using the Wrong Form

This one shows up a lot:

• Paying contractors but filing a 1099-MISC instead of a 1099-NEC
• Paying rent or attorney fees and filing a 1099-NEC instead of a 1099-MISC

It’s like sending a wedding RSVP to the wrong address, it doesn’t get where it needs to go, and you’ll hear about it.

Mistake 5: Missing or Incorrect Totals

Incorrect totals happen when:

• Books haven’t been reconciled
• Vendor names were duplicated in the system
• Payments were miscoded
• Refunds or reimbursements weren’t handled properly

These errors quietly snowball until January, when you suddenly have a “Why are there three versions of Sarah the Designer in our system?” situation.

Mistake 6: Forgetting That Payments Made by Credit Card or Platforms Are Excluded

If you paid a contractor via:

• Credit card
• PayPal
• Stripe
• Square
• Venmo Business

…you typically do not send a 1099. Those platforms issue their own forms (1099-K). Sending your own 1099 duplicates the reporting and confuses everyone.

IRS Red Flags You Definitely Want to Avoid

The IRS isn’t reviewing every 1099 with a magnifying glass, but some things absolutely catch their attention:

• TIN and name mismatches
• Businesses with large contractor payments but no corresponding 1099 filings
• Paying “contractors” who are clearly functioning like employees
• Sudden swings in contractor totals compared to prior years
• Issuing 1099s late, incomplete, or incorrectly

Even a simple mismatch can trigger a CP2100 notice (aka: “Hey, something doesn’t look right”). These notices are fixable, but they’re time-consuming and annoying - two qualities your January does not need.

Key Deadlines, Penalties, and What January Really Looks Like

If the IRS had a motto for January, it would be something like: “Happy New Year, now hurry.”
Deadlines come fast, the penalties are real, and small to mid-sized businesses often feel like they’re playing compliance speed chess while still recovering from holiday mode.

Let’s break down what really matters.

Key Filing Deadlines You Need to Know

There are two main deadlines for 1099s, one for the contractor and one for the IRS. Thankfully, they mostly overlap.

For 1099-NEC (Non-Employee Compensation):

• Send to recipients by January 31
• File with the IRS by January 31 (both paper and electronic)

There’s no later electronic deadline for NEC forms. The IRS wants these quickly because they match them against contractor tax returns.

For 1099-MISC:

• Send to recipients by January 31
• File with the IRS by February 28 if filing on paper
• File by March 31 if filing electronically

So, for most businesses, the January 31 date is the big one to remember, especially if you’re issuing contractor payments.

Penalties: The IRS Late Fee Menu

The penalty structure isn’t meant to terrify you… it’s just very motivating. Penalties apply per form, and they add up quickly.

Here’s the simplified version:

• Up to 30 days late: Penalty is relatively small
• 31 days late to August: Penalty increases
• After August or not filed at all: Penalty gets steep
• Intentional disregard: No one wants to be here - imagine the IRS turning on a spotlight and saying “We need to talk.”

Even “simple” errors like:

• Filing the wrong name
• Using an incorrect TIN
• Forgetting to send a copy to the contractor

can cause the return to be considered incorrect, which comes with its own set of penalties.

Why January Feels Like a Compliance Crunch

There’s a reason business owners feel the squeeze:

• You’re closing the books for the year
• You’re prepping tax documents
• You’re reviewing last year’s financial performance
• You’re tackling budgeting and goal-setting
• Employees are back from vacation
• Cash flow is recalibrating
• And on top of all that… 1099s are due

It’s the perfect storm. The IRS doesn’t give extensions just because you’re juggling a dozen priorities and have glitter from December still stuck in your office carpet.

The Good News

You can make January dramatically easier by preparing:

• Contractor lists
• W-9s
• Payment totals
• Vendor classifications
• Any corrections

before the new year even begins.

Your future self will thank you. Your January calendar will thank you. And your accountant will thank you for not sending panicked emails on January 29.

Your January 1099 Timeline (A Stress-Less Guide)

January moves fast, but 1099 season doesn’t have to feel like you’re trying to catch a train that left five minutes early. With a simple week-by-week plan, you can tackle everything in logical, bite-sized steps, without the frantic “Do we have Carl’s W-9 or not?!” conversations echoing through the office.

Let’s map out your month so it feels more like a checklist and less like a crisis.

Week 1: Get Organized and Verify the Data

You should begin this process in December to get a jump on things. If not, January 1–7 is your chance to set the tone. No chaos yet, just clarity.

• Pull your vendor list for the prior year
• Confirm contractor totals against your accounting records
• Reconcile any outstanding payments so totals are accurate
• Identify anyone who crossed (or is close to crossing) the $600 threshold
• Spot duplicate vendor entries where the same contractor was accidentally entered twice
• Check for missing W-9s, now is the time to track them down

This is the “prep and diagnose” phase. Think of it like taking your car in for an inspection before a long road trip.

Week 2: Finalize Your Contractor Information

Now that you know exactly who should receive a 1099, it’s time to make sure all their information is correct. Again, you can begin this in December to lighten the January load.

• Request updated W-9s from anyone with outdated or missing info
• Verify legal names and EIN/TIN numbers match IRS records
• Confirm mailing addresses (contractors move more often than you’d think)
• Sort contractors into NEC vs MISC categories
• Begin entering data into your 1099 filing system or software

If anything is unclear or inconsistent, Week 2 is the time to fix it, not January 28 when everyone’s sweating.

Week 3: Review, Review, Review

This is your quality-control check. You can only do your reviews in January, once the year is completed, reconciled and closed.

• Review all forms for accuracy
• Ensure totals are correct and reflect the full calendar year
• Check entity types and confirm you aren’t sending 1099s to exempt vendors
• Validate any unusual payments (especially to attorneys, landlords, and medical providers)
• Have a second person look everything over, if possible

Mistakes made in haste can trigger IRS notices or create frustration for contractors, so Week 3 is all about tightening things up.

Week 4: File and Distribute Everything (And Celebrate Your Efficiency)

This is it — the finish line.

• Send 1099 copies to your contractors
• File electronically with the IRS (fastest and most efficient)
• Store copies internally for your records
• Double-check that all forms were accepted by the filing system
• Take a victory lap — you earned it

If you’ve been following the prep plan, this week should be surprisingly calm. No scrambling. No last-minute vendor hunts. Just filing, confirming, and crossing an entire compliance task off your list.

How to Prepare Now (So January Doesn’t Break You)

Here’s the beautiful thing about 1099 season: the hardest work doesn’t actually need to happen in January. In fact, the more you do before the year ends, the easier (and faster) everything becomes later. Think of this as giving your future self a gift — and unlike most gifts in December, this one won’t end up stuffed in a closet.

Let’s walk through what you can do right now to make January smooth, predictable, and dare we say… pleasant.

Start by Running a Year-to-Date Expenses by Vendor Summary Report

This is a simple pull from your accounting system, but it tells you everything:

• Who you paid (you can remove any corporations or physical goods suppliers)
• Whether anyone is nearing or crossing the $600 threshold (anyone under $600 can be removed from your list)
• What you paid them for (drill into any unknown vendors to see what they were paid for. then remove anyone who doesn't require a 1099)
• Who might have slipped through the cracks (this report is a good way to review every vendor you have paid, in case anyone maybe didn't land in the "Contractors" category, but still requires a 1099)

This report becomes your master list, your compass for navigating 1099 territory.

If someone is sitting at $575, you’ll want to double-check whether another invoice is coming before year-end. Better to know now than discover a surprise 1099 requirement in January.

Reconcile Your Accounts Before Year-End

Your 1099s are only as accurate as your books.

Use this time to:

• Review unpaid bills
• Clean up uncategorized expenses
• Correct miscoded contractor payments
• Combine duplicate vendor entries
• Match payment dates with bank records

A clean set of books in December means no unpleasant surprises when you prepare totals in January.

Verify Vendor Details While You Still Have Time

This is W-9 season’s secret sauce.

Now is the perfect moment to:

• Confirm addresses
• Confirm legal names vs trade names
• Confirm whether a vendor is taxed as a corporation (no 1099 required)
• Update contact info in your accounting system

Vendors reply a lot faster now than they do on January 20. Consider it one of the small miracles of December.

Identify Contractors You Forgot Were Contractors

It happens every year - someone remembers they paid:

• A one-off consultant
• A part-time marketing helper
• A handyman for office repairs
• A photographer for team headshots

Those payments count. Better to spot them now instead of discovering them while gulping down cold coffee during the final filing week.

Review Vendors Who Should NOT Receive a 1099

Save yourself unnecessary work by confirming:

• Incorporated vendors
• Large agencies
• Software platforms
• Vendors paid exclusively through credit cards
• International contractors without U.S. tax requirements

Pulling these off the list now keeps you focused on contractors who do need a form.

Get Your Filing Method Ready

Whether you file:

• Through your CAS team
• Through your payroll provider
• Through an online filing service
• Through your accounting software

…make sure you know how the system works. Some platforms close early. Some require setup. Some require IRS e-file registration. Sort this out now, and January becomes an easy upload instead of a scavenger hunt.

If You Use a Bookkeeper, Leverage Them

Your bookkeeper can handle most of the heavy lifting, hunting down W-9s, verifying totals, organizing vendors, and filing forms. But they can work their magic best when the books are accurate and the contractor list is clean.

This is a team sport, and good early preparation on your end makes the whole process smoother.

The Payoff: A January You Can Actually Enjoy

Imagine this: It’s the first week of January. The holiday decorations are slowly migrating back into their boxes, you’re easing into your planning meetings, and instead of frantically tracking down contractor info or triple-checking totals, you’re… calm.

Your books are clean.
Your vendors are organized.
Your W-9s are collected.
Your 1099s are practically ready to file themselves.

This is the payoff of early preparation, a January that doesn’t feel like a compliance ambush.

When you prepare in December (or even November), the benefits stack up:

• No last-minute scrambles for forms or addresses
• No awkward emails asking contractors to “please respond ASAP”
• No guessing whether someone should receive a 1099
• No IRS penalties nibbling at your profits
• No late nights spent wrestling with paperwork you could’ve handled weeks ago
• No grey hairs earned in the process

Instead, you get a January that feels like a fresh start instead of a bureaucratic battlefield.

And the real win? You can focus on the things that actually matter for your business: your clients, your goals, your revenue targets, your team, and the momentum you want to carry into the new year.

Getting ahead of 1099 season isn’t just about compliance. It’s about reclaiming your time, your sanity, and the ability to step into January feeling like the confident, organized business owner you are.

You’ve done the heavy lifting. All that’s left is filing the forms, checking the confirmations, and enjoying a month that feels a whole lot lighter.

If tackling 1099s still feels a little daunting, or if you’d really prefer to step into January without a single compliance headache, we’re here to help.

Whether you need someone to review your contractor list, clean up your books before year-end, or handle the entire 1099 filing process from start to finish, our team can make this season a whole lot easier.

If you need help making sense of your contractor payments or getting your business ready for 1099 season, reach out. We’d be happy to support you so you can start the new year with clarity, confidence, and one less thing on your plate.

Disclaimer: The information provided in this article is for informational purposes only and should not be construed as financial advice. Consult with a qualified professional for personalized guidance tailored to your specific needs and situation. Feel free to reach out to The Numbers Agency for a free consultation to see how we can help!