1099 Filing Requirements: Best Practices for Businesses in 2026

Form 1099 filing requirements can trip up even seasoned business owners. First time handling them? Made mistakes before? No worries. P3 Accounting breaks down IRS 1099 rules and shares best practices that actually work. Below, we walk through classification, required forms, deadlines, and common pitfalls. If you would rather have professionals handle it, our tax team is happy to help.

Contractor vs. Employee: Get Classification Right

The IRS closely reviews worker classification because it directly affects payroll taxes. Getting this wrong can trigger audits, penalties, and back taxes. Classification is determined on a case-by-case basis using three main factors outlined in IRS Publication 15-A.

When reviewing worker status, the IRS looks at the following areas of control and relationship:

• Behavioral control

• Financial control

• Type of working relationship

Reviewing these factors before issuing payments helps reduce risk and keeps your business compliant.

Employee Traits

Employees typically fall under tighter control and direction from the business.

Common indicators include:

• Performs services for wages or salary

• You control what work is done and how it is performed

• You set hours, provide tools, and direct the process

Independent Contractor Traits

Independent contractors operate with more autonomy and business independence.

Key traits include:

• Operates their own business

• Reports income on personal taxes

• Deducts their own business expenses

• You control the final result, not the process

Key trigger: Pay an independent contractor $600 or more by cash or check? You must file Form 1099-NEC.

Correct classification protects your deductions and supports accurate income reporting.

Who Needs a 1099 and Who Does Not

Once classification is clear, the next step is understanding when a 1099 is required. You must issue Form 1099-NEC or 1099-MISC when you pay $600 or more to non-employees by cash or check during the year.

If payment is made by credit card or through third-party payment platforms such as PayPal, Venmo, Cash App, Stripe, or Square, you do not issue a 1099. In those cases, the payment processor may issue Form 1099-K to the recipient instead.

Common 1099 Recipients

Below are common examples of who may require a 1099 and which form typically applies:

No 1099 Required For

In many cases, a 1099 is not required. Common exceptions include:

• C-Corporations and S-Corporations (with limited attorney exceptions)

• Employees

• Payments under $600

Free fillable forms are available on IRS.gov.

Gather Information With Form W-9

Before issuing the first payment, request Form W-9 from any potential 1099 recipient. This form provides the information needed to determine whether a 1099 is required and to complete the filing accurately.

A completed Form W-9 includes the following details:

• Legal name and address

• Taxpayer Identification Number (SSN or EIN)

• Business entity type

At P3 Accounting, we collect W-9s throughout the year from contractors, freelancers, attorneys, landlords, and suppliers. Keeping them on file simplifies year-end reporting and avoids delays.

W-9 Quick Tips

There are a few important rules business owners should understand when collecting and storing W-9s:

• You are not required to verify the accuracy of a W-9 unless you know the information is incorrect.

• If someone refuses to provide a W-9, you are generally required to withhold 24 percent federal backup withholding from future payments.

• If a worker claims to be an employee, they should complete Form W-4, not Form W-9.

• W-9 information may help when reporting large cash transactions on Form 8300, though the form itself does not specifically require a W-9.

Store W-9s securely. Your accountant will need them for accurate filing.

Step-by-Step: How to File Form 1099

Filing Form 1099 is much easier when handled year-round rather than as a January scramble. Breaking it into clear steps helps reduce errors and missed deadlines.

Step 1: Collect W-9 Forms Early

Before issuing any payments, request a completed Form W-9 from each contractor, freelancer, or vendor who may require a 1099. Waiting until year-end often leads to delays or missing information.

At this stage, your goal is simple: gather and store accurate payee details so you are not chasing paperwork later.

Step 2: Track Payments Throughout the Year

As payments are made, keep consistent records of who was paid, how much, and how the payment was issued.

Your tracking should clearly show:

• Total payments made to each contractor

• Whether payments were made by cash, check, or third-party processor

• Which payments may require a 1099

Accounting software such as QuickBooks or a clean spreadsheet can work, as long as the information is complete and updated regularly.

Step 3: Determine Which Form Is Required

Before preparing forms, confirm which 1099 applies to each recipient.

In most cases:

• Form 1099-NEC is used for non-employee compensation

• Form 1099-MISC is used for rent, prizes, awards, and other miscellaneous income

Reviewing the payment purpose and entity type at this stage helps prevent the wrong form from being filed.

Step 4: Prepare the 1099 Forms

Once totals are finalized, prepare Form 1099-NEC or 1099-MISC using IRS-approved forms or accounting software.

This step includes:

• Entering recipient information from the W-9

• Reporting total payments for the calendar year

• Verifying taxpayer identification numbers and addresses

Double-checking entries here helps avoid corrected filings later.

Step 5: Send Recipient Copies by January 31

You must provide a copy of the 1099 to each recipient by January 31, 2026. This deadline applies regardless of how the form is filed with the IRS.

Recipients need this information to prepare their own tax returns, so timely delivery is critical.

Step 6: File With the IRS by the Correct Deadline

After sending recipient copies, submit your forms to the IRS by the appropriate deadline:

• 1099-NEC: January 31, 2026

• 1099-MISC:

  • February 28, 2026, if filing paper

  • March 31, 2026, if filing electronically

If you file 10 or more information returns, you must file electronically. The IRS FIRE system is available at IRS.gov.

Step 7: Submit Any Required State Filings

Some states require separate 1099 filings or participate in combined federal and state programs. Requirements vary by state.

Checking state rules early helps avoid overlooked compliance issues.

Step 8: Keep Copies for Your Records

After filing, retain copies of all 1099s, W-9s, and payment records. The IRS generally recommends keeping these documents for at least four years.

Having organized records protects your business if questions arise later.

Step 9: Set Reminders for Next Year

Once filing is complete, set calendar reminders for the next tax year. Simple reminders to request W-9s, review payments quarterly, and prepare forms in early January can prevent repeat stress.

Proactive planning makes future 1099 seasons far easier.

What If You Forget or Miss the Deadline?

Even organized businesses can miss a filing. The IRS distinguishes between honest mistakes and intentional noncompliance. For the 2026 filing season, penalties per form are:

If you discover a missed 1099, file it as soon as possible. Late filing is always better than not filing at all.

Stay Ahead of 1099 Requirements

Filing Form 1099 does not have to be complicated. Collect W-9s early, track payments throughout the year, and lock in the January 31 deadline. These habits reduce risk and keep your deductions clean.

Schedule a discovery call with P3 Accounting. We provide nationwide accounting support, 1099 preparation, and proactive tax planning for business owners.