Employing 1099 Contractors: What to Do Before End of Year to Avoid Issues
If you’re a small business owner, you probably already know the panic that sets in every January when it’s time to issue 1099s—especially if your records aren’t in order.
But here’s the truth: January is too late to start thinking about 1099s. A little bit of planning now can save you hours of stress and paperwork later.
As a bookkeeper, I help clients get ahead of these deadlines with just a few simple habits. Let me show you what you should be doing right now to make tax season smoother and stress-free.
What is a 1099 Contractor, Anyway?
Form 1099-NEC is used to report payments of $600 or more made to non-employees, such as independent contractors, freelancers, or vendors, during the year.
If you’ve paid someone who isn’t on your payroll to do work for your business, and they’re not a corporation, there’s a good chance you need to send them a 1099.
5 Things You Should Be Doing Now (Not in January)
1. Collect W-9s Before You Pay Anyone
Before sending a payment to a new contractor or vendor, request that they complete a W-9 form. It takes just a minute and provides everything you need to issue a 1099 later: your legal name, business structure, address, and tax ID.
Pro Tip: Make it a company policy to require a W-9 before issuing the first payment.
2. Track Payments to Contractors Throughout the Year
Use your accounting software (QuickBooks, Xero, etc.) to tag and categorize payments made to 1099 vendors. This will let you run clean reports at year-end—no digging through receipts or spreadsheets.
3. Review Vendor Records for Accuracy
It’s easy for addresses, business names, or EINs to be entered incorrectly. Do a mid-year review of your vendor files and correct any errors while there’s still time.
4. Know Who Doesn’t Get a 1099
You typically don’t need to issue 1099s to:
Corporations (except for lawyers)
Employees (they get W-2s instead)
Vendors paid via PayPal or credit card (those are reported by the processor)
5. Set a Reminder for Early December
Give yourself a deadline before the IRS does. Aim to finalize your 1099 list in early December so you’re not scrambling after the holidays. This also gives your bookkeeper time to verify totals and catch any issues.
Want to get ahead of your 1099 responsibilities as a business owner?
Getting ahead of your 1099 responsibilities is one of the easiest ways to save time, reduce stress, and avoid penalties. With just a few good habits, you’ll start January feeling organized—not overwhelmed.
If you’re unsure whether your vendors need a 1099 or need help organizing your records, we’d be happy to support you. Your future self will thank you.
