1099 Prep for Small Business Owners: What to Do Before January

Every January, small business owners discover they owe a form to someone they paid eight months ago and can't reach anymore. 1099 season doesn't have to be like that. A little tracking during the year makes it a quick job.

Who gets a 1099?

In general, you send a 1099-NEC to any individual, sole proprietor, partnership, or LLC taxed as one of those that you paid for services during the year, once their total passes the IRS threshold. Think subcontractors, freelancers, cleaners, consultants, and your landscaper. Corporations are usually exempt, with a few exceptions like attorneys.

Payments you made by credit card, debit card, or through a payment app like PayPal or Venmo for business are reported by the card company or platform on a 1099-K instead. You don't double report those.

Step 1: Get a W-9 from every contractor now

A W-9 gives you the contractor's legal name, address, tax ID, and business type. You need it to fill out the 1099. The best time to collect it is before the first payment. The second best time is today, while they still answer your texts. Make it a habit: no W-9, no first check.

Step 2: Track contractor payments all year

In QuickBooks Online, each contractor is set up as a vendor and marked as eligible for a 1099. Every payment to them is recorded against that vendor. Do that consistently and the year end report builds itself. Skip it and January means digging through twelve months of bank statements.

Step 3: Reconcile before you file

The totals on each 1099 come straight from your books, so your books need to match the bank. Reconcile every account through December 31 before you trust the numbers. A missed payment means an amended form later.

Step 4: File by January 31

1099-NEC forms go to both the contractor and the IRS by January 31. There's no extension for the recipient copy. Late forms carry penalties per form, and they add up fast if you have a crew of subs.

What I handle for my clients

• You collect W-9s. I enter the information and mark each vendor as 1099 eligible.
• I record and categorize every contractor payment during the year as part of accounts payable.
• In January, I reconcile through year end, run the contractor summary, and prepare the 1099s.
• Your CPA gets a clean contractor report along with the rest of your year end package.

Make 1099 season boring

I'm a certified QuickBooks Online ProAdvisor working with small businesses in Tennessee and across the US. Text, call, or email me if you have contractors and no system for tracking them. Monthly bookkeeping starts at $300 a month and includes 1099 prep.