Year-end 1099 prep is one of those tasks that can sneak up fast if you’re not ready. As year-end approaches, deadlines pile up, clients need last-minute projects, and the holidays don’t exactly make life quieter. But when you plan your year-end 1099 prep early, it becomes quick, calm, and completely under control.
It doesn’t have to be stressful or complicated. A few smart habits, done early, can make this one of the easiest parts of closing out your year.
Know Who Needs a 1099 (and Who Doesn’t)
If you’ve paid any independent contractors $600 or more this year for services, you’ll likely need to issue a Form 1099-NEC as part of your year-end 1099 preparation. That includes service-based pros like designers, editors, virtual assistants, photographers, consultants, architects, bookkeepers, office cleaners, landscapers. It does not include corporations.
This isn’t about catching mistakes or “playing IRS police.” It’s simply part of staying compliant and showing where your business money went. Proper year-end 1099 prep also helps you spot vendor errors and keep clean, audit-ready records.
For full details straight from the source, see the IRS guide on reporting payments to independent contractors.
Here’s a simple 1099-NEC decision checklist for you
Issue Form 1099-NEC if:
- You paid $600 or more to a contractor during the calendar year
- The payment was for services (not goods or products)
- The contractor is not a corporation (unless it’s a law firm or medical provider)
- You paid via:
- Cash
- Check
- ACH transfer
- Direct deposit
- You are a business or nonprofit (not a personal payer)
Do NOT issue Form 1099-NEC if:
- You paid via:
- Credit card
- Debit card
- PayPal (Goods & Services)
- Stripe, Square, Venmo (business profile)
- The payment processor will issue Form 1099-K instead
- The contractor is a corporation (unless an exception applies)
Special Notes:
Threshold for 1099-K: $600 or more in total payments (as of current IRS rules).
Attorneys and medical providers must receive a 1099-NEC even if incorporated (unless paid via card or processor).
Form 1099-K is issued by the payment processor, not you.
Pro Tip: Check your vendor list in your accounting system. If you see multiple contractors close to the $600 mark, flag them now instead of waiting for January surprises.
Gather Information Now, Not in January
The IRS recommends that businesses request a completed Form W-9 from any contractor they pay $600 or more in a calendar year for services.
The W-9 provides the contractor’s Taxpayer Identification Number (TIN), legal name, and business classification, which are needed to correctly file Form 1099-NEC. You can download a fillable W-9 form directly from the IRS website and keep it handy to send the link to all new contractor relationships.
But, it gets tricky. You need to also keep track of how you paid them. Because in most cases, if you paid with credit card or 3rd party payment processor, you don’t need to file. Those companies do the filing.
If you’re missing a signed form for any contractor you previously paid, you can send a quick message now to confirm contact info and payment totals, along with the IRS link. Most contractors appreciate the reminder. This shows you’re organized and proactive.
Pro Tip: In my own business, I ask for a W-9 before I make the first payment. They may not bill as much as $600, but there’s no harm in being prepared. This one habit saves hours of follow-up later and keeps year-end 1099 prep simple.
Let Your Accounting System Do the Heavy Lifting
If you’re using cloud accounting apps such as FreshBooks, Xero, or QuickBooks Online, you already have tools that make 1099 prep simple. FreshBooks allows you to set up contractors within your projects so you can track time, costs, and create reports for each one. In Xero and QBO, you can tag contractors as 1099-eligible, track payments automatically, and export a ready-to-file report in minutes.
These built-in tools take the pressure off your year-end 1099 prep, especially when you have multiple contractors.
Automation doesn’t replace accuracy. But it does take the guesswork (and late-night spreadsheet panic) out of the process.
Double-Check Before You File
Before you hit “submit,” do a quick accuracy check:
- Match each contractor’s total against your payment records.
- Exclude reimbursements for materials or supplies.
- Confirm you’re reporting only payments made by cash, check, or direct transfer—not credit cards or PayPal (those are handled separately by the processor).
This final step is part of your year-end 1099 prep checklist. It’s one last review to catch errors before you file. It’s also where solid contractor tax reporting habit pay off.
The filing deadline for 1099-NEC forms is January 31, but that doesn’t mean you have to wait until then. If you’ve already verified your information in December, you’ll start the new year calm and clear-headed.
Pro Tip: File electronically through your accounting software if your plan allows, or the IRS e-file system. I use Track1099 (now owned by Avalara) because it’s easy and allows for corrections. In any case, electronic e-filing is faster, more secure, and saves you from printing and mailing headaches.
Make Next Year Even Easier
Every business owner deserves a smoother year-end. You can make next year’s 1099 preparation nearly effortless with a few tweaks now:
- Add a W-9 request to your contractor onboarding checklist.
- Keep a digital vendor folder with contracts, invoices, and tax forms all in one place.
- Set a reminder in your calendar each October to review vendor payments.
Pro Tip: Create a simple rule: no payment goes out until the W-9 comes in. Be sure you add this to your agreement documents. That way, the contractor knows that payment is contingent on providing tax documentation. And voila! You’ll never have to chase forms again! Taking these steps means your future year-end 1099 prep will be organized, predictable, and stress-free.
Want even more ways to set yourself up for an easy year-end close?
Read Procrastinators Rejoice: A Simple Guide to Year-End DIY Accounting for simple habits that make financial wrap-up stress-free.
You Don’t Have to Do It Alone
If you’d rather spend your December on clients and family instead of paperwork, I can help. I work with service-based business owners to keep their books clean, compliant, and stress-free all year long.
Book a complimentary 20-minute call to see if we’re a good fit. We’ll talk about what’s working, what’s not, and how to make next year’s year-end 1099 prep a total non-event.
