- 1Pull the vendor payment report. January through September, filtered above $2,000, sorted by amount. Set aside the obvious corporations.
- 2Confirm a signed W-9 for each name. The form itself: entity name, entity-type checkbox, address, TIN. A tax ID typed into an email is not a substitute.
- 3Chase the gaps now. A contractor still working with you answers within the week. The same request in January, eight months after the project ended, often goes nowhere.
- 4Check how each vendor was paid. Card and third-party network payments are excluded. The processor reports those. Only the ACH and check portion is yours to report.
- 5Verify addresses. A 1099 mailed to a stale address is a 1099 you will be reissuing in February.
What actually has to go out
The form most businesses file is the 1099-NEC, for non-employee compensation paid during the calendar year to a person or business that is not a corporation. The threshold changed this year: for payments made in 2026 it is $2,000, up from the $600 figure that governed for decades, raised by the One Big Beautiful Bill Act and indexed for inflation going forward. The same $2,000 threshold now applies to most 1099-MISC categories. Contractors, freelancers, consultants and the person who plows your lot all sit here.
The 1099-MISC still exists and covers a different set: rent paid to a landlord who is not a corporation, prizes, and a handful of other categories. If you lease space or equipment from an individual or an LLC, this one applies to you and is routinely missed.
Two exclusions save more work than anything else. Payments to corporations, including S-corps and C-corps, generally do not require a 1099, with attorneys as the notable exception; legal fees are reported regardless of entity type. And payments made by credit card, debit card or a third-party network such as PayPal are excluded, because the processor reports them on a 1099-K instead. Report those yourself and the contractor gets double-counted income, which produces an IRS notice for them and an awkward conversation for you.
That second exclusion has a practical consequence: how you paid matters as much as whom you paid. A contractor you paid $4,000 by ACH gets a 1099-NEC. The same contractor paid the same amount by card gets nothing from you. Your accounting system knows the difference only if the payment method was recorded correctly, which is a bookkeeping question rather than a tax one.
Why October and not January
Every January, some portion of a small company’s finance time disappears into a task that looks trivial and is not: getting a tax ID number out of a contractor who worked for you in March and has since stopped answering email. The filing deadline is January 31. The vendor went quiet in November. Those two facts meet, and someone spends a week on the phone.
The fix is not a better January. It is doing the cleanup in October, while the relationships are still warm and the list is short enough to work through in an afternoon.
The new threshold helps. Where last year’s list ran to every vendor over $600, this year it starts at $2,000. For most businesses under $5M in revenue, that is somewhere between ten and forty names. Collect W-9s from everyone regardless. A vendor sitting at $1,800 in September can cross $2,000 in November, and that is not the month to start chasing paperwork.
Backup withholding, and why the W-9 is not a formality
If a vendor will not provide a TIN, the rules do not let you simply skip the form. You are required to apply backup withholding , currently 24%, to their payments and remit it to the IRS.
In practice almost nobody discovers this in time, because the problem surfaces in January when the payments have already gone out in full. At that point you have paid the vendor 100% and still owe the withholding.
The cleaner policy is the one large companies use and small ones skip: no W-9, no payment. Collect it at onboarding, before the first invoice is paid, alongside the contract and the banking details. Make it a required field in your vendor setup and the January problem stops existing.
Two adjacent items worth the same pass
While the vendor list is open, check for worker classification risk. A contractor who works your hours, uses your equipment and has no other clients is a contractor in your accounting system and something else in the eyes of the IRS and the state labor department. Reclassification is expensive and assessed retroactively. Q4 is a reasonable moment to look honestly at anyone who has been full-time-shaped for a year or more.
Then confirm your filing mechanism. The IRS threshold for mandatory electronic filing is 10 or more information returns in aggregate across all form types, a low bar most businesses clear without realizing it, because the count includes W-2s. Eight contractors and four employees makes you an electronic filer. Sort out the platform and the credentials in November rather than on January 29.
What good looks like
By the end of October you should be able to answer three questions without opening a bank statement: who is getting a 1099 this year, whether you hold a signed W-9 for every one of them, and whether your books can separate card payments from everything else.
If all three are yes, January is a filing task measured in hours. If any is no, the gap is almost never in the tax knowledge. It is in the vendor records, and vendor records are fixable in October in a way they are not in January.
Finsightic handles accounting, controller oversight, and fractional CFO work for growing companies. Fixed monthly pricing, no long-term contracts.
Take the free Financial Health Score →This article is general information, not tax advice. Thresholds and rates change. Confirm current-year figures with your CPA before filing.
For informational purposes only. This is general information, not tax or legal advice. Rules change and treatment is fact-specific, so confirm the details with your CPA before you act on them.