In plain English
Check current thresholds, deadlines and instructions with the IRS. Card payments are generally reported by the processor instead.
Prepare from your vendor payments report.
Why it matters
If you pay contractors, you may have to report those payments to the IRS and to the contractor. Preparing these forms from incomplete vendor records is slow and error-prone, and missed or late forms can bring penalties. Clean books during the year make the January rush much shorter.
The forms also matter to contractors, who rely on them to prepare their own returns.
Worked example
Vendor B paid $1,350 by check is reportable if over the current threshold.
How to handle it
- Flag contractor vendors as 1099 eligible in your software when you set them up.
- Code contractor payments to consistent expense accounts so they can be totaled.
- Before year end, run a vendor payment report and compare it with your W-9 files.
- Exclude payments made by card or third-party networks if the current IRS instructions say they are reported elsewhere.
- Check the current IRS instructions for thresholds and due dates, or ask your accountant, before filing.
Common mistakes
- Counting card payments in the 1099 total, which can report the same income twice.
- Missing contractors who were paid from a personal account or by an app, so they never appear in the report.
- Filing with old addresses or IDs because W-9s were never updated.
Not the same as: Form W-9
The 1099-NEC reports payments you made. The W-9 is the earlier form that supplies the contractor's name and taxpayer ID so you can prepare it. See Form W-9.
Go deeper
- Preparing Form 1099-NEC From Your Books: Steps to turn your vendor payments into accurate 1099-NEC filings: reports to run, clean-up checks, and timing for January.
- 1099 contractors: a checklist for New Jersey businesses: A practical checklist for paying independent contractors: W-9 collection, 1099-NEC filing, worker classification and what to track during the year.
Related terms
- Form W-9: The form a contractor gives you with their name, tax classification and taxpayer ID before you pay them.
- General ledger: The complete record of every account and transaction in a business's books.
- Fixed asset: A long-lived item the business uses, such as equipment, vehicles or buildings.
Common questions
What is Form 1099-NEC?
An IRS information return reporting payments to non-employee contractors above a threshold.
Can you give an example of Form 1099-NEC?
Vendor B paid $1,350 by check is reportable if over the current threshold.
Do I issue a 1099-NEC for payments to a landlord?
Rent is generally reported on a different form, not the 1099-NEC. Check the current IRS instructions or ask your accountant which form applies.
What if I find a contractor I missed after filing?
You can usually file the missing form late or file a correction. Ask your accountant how to handle it and do it as soon as you notice.
General information, not tax, legal or accounting advice. Confirm rules with the IRS, the NJ Division of Taxation or a licensed professional.