- Form 1099-NEC reports payments to independent contractors; payments to corporations are generally excluded, with exceptions.
- Collect a W-9 from every contractor before the first payment.
- Forms are due to contractors and the IRS by January 31.
- The reporting threshold changed for payments made from 2026 on, so confirm the current figure with your CPA.
- Clean vendor records and a dedicated contractor account make year-end totals a report, not a project.
Do I need to issue 1099 forms for contractors, and can a bookkeeper help?
Usually, yes. If you pay independent contractors for services, you generally issue Form 1099-NEC to each one paid above the IRS reporting threshold, which changed for payments made from 2026 on, so confirm the current figure with your CPA. Forms are due to contractors and the IRS by January 31. SmartGrowth Bookkeeping tracks contractor payments and W-9 details all year so the totals are ready.
- Form 1099-NEC reports payments to independent contractors for their services.
- Payments to corporations are generally not reported on it, though there are exceptions your CPA can point out.
- Collect a W-9 from each contractor before you pay them.
- Copies go to the contractor and to the IRS by January 31.
- The threshold was raised from $600 for payments made from 2026 on. Check the current amount with your CPA rather than relying on an old figure.
Whether someone is an independent contractor or an employee is a legal question, not a bookkeeping one. If a worker keeps regular hours under your direction, ask your CPA or an attorney before treating them as a contractor.
There are other forms in the 1099 family for other kinds of payments. Your CPA decides which ones apply to your business; the bookkeeper makes sure the payments behind them are recorded clearly.
Why the W-9 comes first
A W-9 gives you the contractor's legal name, business name if any, tax classification, address and taxpayer identification number. With it on file, you know who you are paying, whether they are a corporation, and exactly what to put on the 1099.
The most common 1099 headache is chasing a W-9 in January from someone you paid once in the spring. They have moved, changed phone numbers or simply do not answer. Collecting the form up front avoids all of that.
- Request the W-9 before the first payment, as part of onboarding a new contractor.
- Store W-9s securely. They contain taxpayer ID numbers and should not sit in an open email folder.
- Ask for an updated form when a contractor changes their business name or structure.
- Make "no W-9, no payment" a standing policy, and talk to your CPA about what to do if someone refuses.
Tracking contractor payments during the year
Year-end 1099s are only as accurate as the records behind them. Both QuickBooks and Xero let you flag contractors and run a report of what each one was paid, but that report depends on how payments were recorded all year.
- Keep one vendor record per contractor. The same drywall sub entered once by first name, once by full name and once by business name splits one person's total into three.
- Record contractor payments in a dedicated expense account so they do not blend into supplies or general labor.
- Record payments made outside the main account, such as cash or a personal card, so they are not missed.
- Flag payments made by card or through payment apps for your CPA, since how those are reported can differ.
- Attach the W-9 or note its date on the vendor record so missing forms are easy to spot.
A general contractor is a good example. In one year they may pay a drywall sub, an electrician, a cleanup crew and a handful of one-off helpers. Each needs a W-9 and a clean payment history. More on job-heavy businesses is on the construction and contractors page.
The year-end 1099 checklist
| Task | When | Who usually does it |
|---|---|---|
| Collect the W-9 | Before the first payment | You or your bookkeeper |
| Record payments to the right vendor and account | Every month | Bookkeeper |
| Run the contractor payment report and check it | December or early January | Bookkeeper |
| Chase any missing W-9s | As soon as they are spotted | You or your bookkeeper |
| Confirm which payments need forms and the current threshold | Early January | CPA |
| Prepare, file and send the forms | By January 31 | You, your CPA, or your bookkeeper where agreed |
The calendar is tight. Year-end closes, statements arrive in early January and the deadline is the end of that month. Starting the review in December, with the year's payments already recorded, leaves time to fix gaps.
Common 1099 mistakes
- Paying contractors without a W-9 on file.
- Duplicate vendor records that split one contractor's total.
- Contractor payments scattered across several expense categories.
- Forgetting contractors paid from a personal account or in cash.
- Using a threshold remembered from a prior year instead of confirming the current one.
- Treating workers as contractors when the relationship looks more like employment.
Employees are paid through payroll and receive W-2s from your payroll provider. Contractors are tracked as vendors. Keeping the two apart in the books is what makes both year-end processes go smoothly.
Already behind on contractor records?
If it is late in the year and contractor payments are scattered across accounts, there is still time to sort them out, but start now rather than in the last week of January.
- Pull every payment to anyone who is not an employee or a regular supplier, from all accounts and cards.
- Group the payments by person or business and merge duplicate vendor records.
- Make a list of who is missing a W-9 and request the forms immediately.
- Send the totals and the W-9s to your CPA to confirm who needs a form under the current threshold.
- Recategorize the payments into a dedicated contractor account so next year starts clean.
If the books themselves are months behind, contractor totals cannot be trusted until the accounts are reconciled. In that case, catching up the books comes first, and the 1099 totals come out of the corrected records.
How SmartGrowth helps
SmartGrowth Bookkeeping records contractor payments to the right vendors and accounts all year, keeps track of which W-9s are on file, and prepares the year-end contractor totals and 1099 information for your review as part of payroll and contractor records. SmartGrowth can then prepare and file the 1099 forms for you, or hand the totals to your CPA if you prefer.
Because the same records feed your tax-ready books, your CPA receives contractor totals that match the expense accounts on the profit and loss. SmartGrowth can coordinate with your CPA directly, as described in how your bookkeeper and CPA work together.
More questions
Do I send a 1099 to a contractor who has an LLC?
It depends on how the LLC is taxed, which the contractor indicates on their W-9. Some LLCs are treated like individuals for this purpose and some like corporations. Your CPA can confirm based on the forms you collected.
Does the threshold apply per payment or per year?
It applies to the total you paid a contractor during the year, not to each payment. Several small payments can add up to a reportable total, which is why tracking every payment to the right vendor matters.
What happens if I miss the January 31 deadline?
Penalties can apply for late or missing forms. If you are late, talk to your CPA right away and file as soon as possible rather than skipping the forms.
Do employees get 1099s?
No. Employees receive a W-2 through payroll. A 1099-NEC is for independent contractors. If you are unsure which category a worker falls into, ask your CPA or an attorney before year end.
How long should I keep W-9s and contractor records?
Keep them with your tax records for as long as your CPA recommends, and store them securely because they contain taxpayer ID numbers. Keeping them attached to the vendor record in your accounting software makes them easy to find later.