Contractor 1099 Preparation
1099 forms filed by deadline. Contractor copies sent. Filing archive maintained. Backup withholding applied for missing W-9 cases.
Before you start
- Vendor master with W-9s collected
- Annual payment data per vendor
- 1099 filing system (Tax1099, Track1099, or accounting tool)
- Annual payments to each contractor (>=$600 threshold)
- Contractor W-9 with TIN
- Payment classification (services, rent, royalties, etc.)
The steps
- Generate the annual contractor payment report — Pull all payments to non-corporate entities for the calendar year. Filter to those over the $600 threshold for 1099-NEC (services) or other thresholds per form type. Confirm against the bank feed.
- Validate W-9 on file for each — Cross-reference each contractor against the W-9 archive. For any missing W-9, send a request immediately — without W-9 you cannot file 1099 properly. Backup withholding (24%) applies if you don't have a TIN.
- Categorize payment types — Classify by 1099 form: 1099-NEC (services), 1099-MISC (rent, royalties, prizes), 1099-K (handled by payment processors typically). Different forms have different boxes — categorize correctly.
- Verify TIN against IRS records — Run TIN matching via IRS or your filing service. Mismatches lead to penalties. Resolve mismatches with the contractor before filing.
- Generate and review draft 1099s — Generate drafts. Review: payee name, address, TIN, amount, form type. Pay special attention to amount accuracy. Filing wrong amounts triggers contractor calls and IRS attention.
- File with IRS and send copies to contractors — File 1099-NEC forms by Jan 31. File 1099-MISC forms with IRS by Feb 28 (paper) or Mar 31 (e-file). Send copies to contractors by Jan 31 regardless. Use e-file service for tracking and proof of filing.
- Document the filing and archive — Archive: filing confirmations, contractor copies sent, any corrections issued. Retain for 4+ years (IRS recommendation). Documented filings are the protection in audit.
If it goes wrong
Missing W-9s discovered at filing time
Collect W-9s at vendor onboarding. Hold first payment until W-9 is on file. Never let a contractor invoice without W-9.
TIN mismatch causes IRS notice
Pre-validate via TIN matching service before filing. Mismatches resolved upfront beat IRS notices later.
Filed after Jan 31 deadline
Late penalties: $60 per form initially, increasing over time. Calendar-block in December for prep, January for filing. Don't slip.
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