As the year wraps up, it’s time to turn your attention to one of January’s most predictable challenges, 1099 season. With a little preparation now, you can avoid the scramble, reduce errors, and stay compliant. Here are our top tips to make filing season smooth and stress-free.
1. Review Vendor Information Early
Run a vendor report from your accounting system and confirm that each payee has a current W-9 on file. Check the legal name, any doing business as (dba) name, address, and taxpayer identification number (TIN). If anything is missing or outdated, request an updated form now—well before the January rush.
- Check for correct name/TIN combinations for single member LLCs and sole proprietors.
- Line 1 of the W9 should always be the legal name of the individual associated with the TIN.
- If the TIN is a SSN (pattern XXX-XX-XXXX) use the individual name (Line 1)
- If the TIN is an EIN (pattern XX-XXXXXXX) use the entity name (Line 2)
- Watch for naming conventions -especially for multi-part last names.
2. Determine Who Needs a 1099
Not all vendors qualify for a 1099. For 2025, you must generally report payments totaling $600 or more to individuals, partnerships, and LLCs for services, rent, or prizes. Keep in mind:
- Attorneys and medical providers receive 1099s even if incorporated.
- Credit card and PayPal payments are reported separately on Form 1099-K by the payment processor. Exclude these payments from your 1099s.
- Employees should receive Form W-2, not a 1099.
- Confirm the correct box – 1099-NEC for services; 1099-Misc for rent, stipends and attorney fees
- Exclude Corporations and LLCs taxed as C-Corps or S-Corps
3. Reconcile and Review Your Data
Before year-end, reconcile vendor totals between your general ledger and accounts payable subledger.
- Check for duplicate vendor names with slight variations and combine them
- Exclude voided or reimbursed transactions
- Watch for mixed payment types (e.g., part check, part card, part ACH) and exclude any portion paid by credit card.
4. Run a TIN Match
Use the IRS TIN Matching Program or your e-filing software to verify name/TIN combinations. Early validation can help you avoid costly B-Notices or penalty letters after filing.
5. Verify Contact Details
Double-check each vendor’s mailing address and preferred delivery method. Returned 1099s in February are one of the most common (and avoidable) filing headaches.
6. Test Your Filing System
Confirm that your e-filing platform is set up for the current tax year. Ensure login credentials, permissions, and state filing requirements are up to date.
7. Mark Key Deadlines
- January 31: File and furnish Form 1099-NEC to recipients and the IRS.
- February 28 (paper) or March 31 (electronic): File Form 1099-MISC with the IRS. Check your state’s specific deadlines, as they may differ.
8. Maintain Documentation
Keep W-9s, TIN match results, correspondence, and payment reports together in one secure file. Good recordkeeping supports compliance and simplifies next year’s process.
9. Communicate With Your Team
Make sure departments know what information you’ll need and when. Clear communication prevents last-minute confusion about vendor classifications or missing forms.
10. Prepare for Corrections
If you do find an error, file a corrected 1099 promptly and document the fix. Quick follow-up can prevent penalties and simplify any future audits.
Final Thought: Thinking ahead to January 2027
And while we’re talking about January, it’s not too early to make a resolution! Next year, don’t wait until December to collect W-9s. Make it part of your new vendor setup process to request and store W-9s before any payment is issued. This simple habit can save hours of frustration when 1099 season rolls around again.
