Best Practices for 1099s

If you just want the quick takeaway, here it is:

👉 Best Practice: Always collect a W-9 from any person or business you pay more than $600 for services.

Want the details? Let’s break it down.

What Is a 1099?

A 1099 is an “information return” that tells the IRS about income earned outside of payroll. Think of it like a W-2, but for non-employee income.

There are several types of 1099s you might see:

• 1099-INT: interest income from a bank or lender

• 1099-DIV: dividends from stocks or mutual funds

• 1099-B: proceeds from the sale of stocks or securities

• 1099-R: retirement account distributions

• 1099-MISC/1099-NEC: payments for non-employee services (this is the one most business owners need to worry about)

If you pay someone for services in your business, you’ll likely need to issue them a 1099-NEC (previously reported on 1099-MISC).

Who Gets a 1099?

In general: Any person or company you pay $600 or more for services, not products.

A few important notes:

• Corporations: Payments to C-corps and S-corps generally don’t require a 1099. But payments to sole proprietors, single-member LLCs, and LLC partnerships do.

• Credit Card Payments: If you paid with a credit card, you don’t issue the 1099 — the credit card company reports it.

When Are They Due?

1099s are due January 31st each year for the previous calendar year. Mark your calendar — this deadline comes fast after the holidays!

How Do You File?

• Paper filing: Send Copy A with Form 1096 to the IRS, and send Copy B to the recipient.

• Electronic filing: Faster, easier, and what we recommend if you have multiple forms.

What If You Don’t File?

• Not filing at all: $250 penalty per form, with no maximum.

• Filing late: Penalties range from $30–$100 per form (up to $500,000 per year), depending on how late you are.

Bottom line: it’s way cheaper (and less stressful) to file on time.

The #1 Best Practice

The easiest way to save yourself a January headache? Collect W-9s from vendors upfront.

Do this before you pay them — every single time. Here’s why:

• Even if it’s under $600 now, you might hire them again later.

• Even if you pay by credit card this time, you may use a check or ACH next time.

• Even if you think they’re a corporation, it’s better to collect the form and confirm.

Final Thoughts

1099s don’t have to be a nightmare. With good habits now, you’ll thank yourself later.

And remember: if you’re unsure, ask your accountant (that’s what we’re here for!). Don’t have one? Book a call with us here to see how we can help you stay ahead of deadlines, avoid penalties, and keep your finances running smoothly.