Year-End Prep Tip #1: The Complete Guide to Issuing 1099s for 2026

Every January, business owners across the country scramble to track down contractor addresses, missing tax ID numbers, and totals for the year, all while racing a tight IRS deadline. It doesn’t have to be that way. With a bit of prep in the last few months of the year, your 1099s can be one of the easiest items on your January to-do list.

This year there is also a big change to know about. Let’s walk through everything, from the key terms to the exceptions to the prep work that keeps you ahead of the deadline.

First, a Few Key Terms

•Independent Contractor (IC): a worker who is not considered an employee of your company.

•Vendor: any individual or business that your business paid.

•W-9: a form that independent contractors and businesses who provided a service to your company complete. It lists their legal or business name, entity type, address, and Tax ID or Social Security number.

•1099: a tax document a business gives each January to an independent contractor or business it paid for services, reporting the amount paid during the prior year.

The most common type is Non-Employee Compensation (NEC). Simply put, someone who was not your employee helped you in your business, such as with labor, legal, accounting, consulting, marketing, or repair work. For simplicity’s sake, I refer to all of these as “ICs” throughout this article.

What's New for Tax Year 2026

The 1099 reporting threshold has increased from $600 to $2,000. This applies to payments made in 2026 (the forms you will send in early 2027), and the IRS will begin adjusting the threshold for inflation in future years.

As a reminder, there are two forms most small businesses use:

•Form 1099-NEC is for non-employee compensation. Contractor payments go in Box 1. This is the form most small businesses will send.

•Form 1099-MISC is still used for other payments, most commonly rent. Many of our clients send both: a 1099-NEC to their contractors and a 1099-MISC to their landlord.

The $2,000 Rule, Explained

One of the most common questions I get is about the dollar amount. Here is how it works: add up everything you paid a vendor during the calendar year, counting only the payment methods that are included (see the exceptions below).

•If the total is less than $2,000, you do not send a 1099.

•If the total is $2,000 or more, you do.

And there is no rounding here. While you might round amounts in other reporting, you never round for 1099 purposes. A vendor paid $1,999.99 does not qualify for a 1099. They simply didn’t reach $2,000.

Deadlines to Know

•Monday, February 1, 2027: 1099-NEC forms are due to your contractors and to the IRS. The usual January 31 deadline falls on a Sunday this year, so it moves to the next business day.

•Monday, February 1, 2027: 1099-MISC copies are due to recipients, such as your landlord.

•March 1, 2027 (paper) or March 31, 2027 (e-file): 1099-MISC forms are due to the IRS.

Common Exceptions

It’s no surprise that there are exceptions. Here are the ones I see most often:

1.Credit card and third-party payments. Anything you paid by credit card, or through a payment platform like PayPal, is not included on your 1099. The card processor or platform reports those payments to the vendor on a Form 1099-K instead. One caution: personal transfers, like PayPal “Friends & Family,” are not processed as business payments. If you paid a contractor that way, talk with your bookkeeper about how to handle it.

2.Corporations. Vendors taxed as a C or S Corporation generally do not need a 1099. According to the IRS’s 2026 Instructions for Forms 1099-MISC and 1099-NEC, this includes LLCs that are taxed as S or C Corporations. That’s one big reason a completed W-9 is so important: it tells you the vendor’s entity type.

3.The exception to the corporation exception. Payments to attorneys and payments for medical or health care services must still be reported, even if the vendor is a corporation.

4.Employees. Anyone on your payroll gets a W-2, not a 1099.

5.Goods only. Payments made purely for merchandise, inventory, or supplies are not reported on a 1099.

Filing with the IRS

Sending a copy to your contractor is only half of the job. You must also file the forms with the IRS. If your business files 10 or more information returns in total (including W-2s and all 1099s combined), you are required to e-file. The IRS offers a free online portal called IRIS, and most payroll and accounting software can e-file for you as well.

Why the W-9 Matters So Much

The W-9 is where everything on the 1099 comes from: the vendor’s legal name, address, entity type, and Tax ID. Without it, you simply can’t complete the form. And if a vendor refuses to provide their Tax ID, the IRS may require you to withhold 24% from their payments (called backup withholding). A W-9 up front avoids that headache entirely.

Your Year-End Prep Work

1.Review your expense transactions for the year and identify which vendors meet the $2,000 requirement using included payment methods.

2.Confirm you have a W-9 for each of those vendors. If not, send them a blank W-9 (available at irs.gov) and ask them to complete and return it as soon as possible.

3.Refresh older W-9s. If a vendor was paid in prior years and the W-9 on file is dated before 2026, ask for a new one. Their address, business name, or entity type may have changed, and your 1099 needs current information.

4.Choose how you’ll produce your 1099s. If you’re filing manually, order your forms early. If you’re using software, learn how it works and find out its internal deadline so you can meet the February 1 due date.

5.Process early in January. Filing as early as possible gives vendors time to reach out with questions or updates before the deadline.

Pro Tip: Don’t pay a new vendor until you’ve received a completed W-9. It’s the single easiest way to avoid scrambling at year-end.

The Bottom Line

The new $2,000 threshold means fewer forms for many businesses, but the rules around who qualifies, and how to file, still matter. A little attention now keeps January calm and your records audit-ready.

Would you rather hand 1099s off entirely? Our Final Form 1099 service handles the whole process for you: reviewing your vendors to see who qualifies, collecting W-9s, e-filing your 1099-NEC and 1099-MISC forms with the IRS and state, and delivering copies to your contractors, all audit-ready. Enrollment opens October 1, and we accept a limited number of clients to keep the service personal. Learn more and reserve your spot.

This article is for informational purposes only and should not be construed as business, accounting, or legal advice. Details are subject to change without notice.

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