As December 2025 rolls in, the holiday season isn’t the only thing on a company’s mind. For many businesses, it’s also crunch time for preparing 1099 forms, which are due to the IRS and your contractors in January 2026. Failing to comply can lead to penalties, so getting ahead of the curve is crucial.
This guide will walk you through everything you need to focus on in December 2025 to ensure a smooth, stress-free 1099 submission in early 2026.
What is a 1099 Form and Why Does it Matter?
A Form 1099 is an IRS information return used to report certain types of income other than wages, salaries, and tips. For most businesses, the most common type is the Form 1099-NEC (Nonemployee Compensation), used to report payments to independent contractors.
The IRS requires businesses to report these payments to ensure that self-employed individuals and independent contractors accurately report their income. It helps the IRS identify discrepancies and ensures fair tax collection.
Key IRS Requirements to Know:
- Who to File For: Generally, you need to file a Form 1099-NEC for each person you have paid at least $600 in the course of your trade or business for services performed by someone who is not your employee (i.e., an independent contractor). This includes fees, commissions, prizes, awards, and other forms of compensation.
- Other 1099 Forms: While 1099-NEC is most common for services, remember other 1099 forms like:
- 1099-MISC: For rent payments, attorney fees (if not for services), medical and healthcare payments, and other miscellaneous income.
- 1099-INT: For interest income.
- 1099-DIV: For dividends and distributions.
- Due Dates (for Tax Year 2025, to be filed in 2026):
- January 31, 2026: Deadline to provide Form 1099-NEC to recipients and to file Form 1099-NEC with the IRS (whether by paper or electronically).
- Other 1099 forms (e.g., 1099-MISC): Generally, due to recipients by January 31, 2026. Paper filing with the IRS is typically February 28, 2026, and e-filing is March 31, 2026. However, it’s always safest to aim for the earliest deadline.
Your December 2025 1099-Readiness Checklist:
Your December 2025 1099-Readiness Checklist:
1. Identify All Independent Contractors: Go through your payment records for 2025. List every vendor or individual who provided services and received payments from your company.
2. Collect W-9 Forms: This is the most crucial step. For every contractor identified, you must have a completed and signed Form W-9 on file. This form provides their Taxpayer Identification Number (TIN) – either a Social Security Number (SSN) or Employer Identification Number (EIN) – and their correct name and address.
- Action: If you’re missing W-9s, send requests immediately. Follow up politely but firmly. You cannot accurately prepare a 1099 without this information.
3. Verify Payment Thresholds: Review total payments made to each contractor for the year. Mark those who received $600 or more in nonemployee compensation.
4. Review Payment Categories: Double-check your accounting software’s expense categories to ensure payments for services are correctly flagged for 1099 reporting. Distinguish between payments for goods (which generally don’t require a 1099) and payments for services.
5. Update Contact Information: Ensure you have the most current mailing addresses for all your contractors. Incorrect addresses lead to returned mail and delays.
Mid-to-Late December: Prepare & Review
6. Use Reliable Software: Most accounting software (e.g., QuickBooks, Xero) can generate 1099s. Familiarize yourself with the process. Alternatively, use dedicated 1099 preparation software or services.
7. Generate Draft 1099s: Create preliminary 1099 forms based on the data you’ve gathered.
8. Thoroughly Review Each Form:
- Does the recipient’s name match the W-9 exactly?
- Is the TIN correct (SSN or EIN)?
- Is the address current and accurate?
- Does the reported amount match your payment records?
- Is the correct box checked (e.g., Box 1 for nonemployee compensation on 1099-NEC)?
9. Look Out for Exceptions:
- Corporations: Generally, payments to corporations do not require a 1099-NEC, unless they are for legal services. Always check the W-9, as it will indicate if the contractor is a C-Corp or S-Corp.
- Payments via Payment Processors: If you paid contractors through third-party payment networks (e.g., PayPal, Stripe) and they processed the payment, those platforms might issue a Form 1099-K to the contractor. You usually don’t need to issue a separate 1099-NEC for these payments, but always confirm the nature of the transaction and who is responsible for reporting.
10. Plan Your Submission Method: Decide if you’ll be paper filing or e-filing with the IRS. E-filing is often more efficient and is required if you’re filing 10 or more information returns. If e-filing, ensure your software is up-to-date and you have any necessary Transmitter Control Codes (TCCs).
Early January 2026: The Final Push
11. Send Forms to Recipients: By January 31, 2026, mail or electronically deliver Copy B of Form 1099-NEC to each contractor. Ensure you retain a copy for your records (Copy A).
12. File with the IRS: By January 31, 2026, submit Copy A of Form 1099-NEC to the IRS, either electronically or via paper mail.
13. Keep Excellent Records: Store copies of all W-9s, submitted 1099 forms, and proof of mailing/e-filing confirmations for at least three years (it’s often recommended to keep them longer, up to seven).
What if You Can't Get a W-9?
If, after repeated attempts, a contractor refuses to provide a W-9, you may be required to perform backup withholding on future payments to them. This means withholding 24% of their payments and remitting it to the IRS. While a last resort, it’s an important consideration for compliance.
Conclusion
Getting 1099-ready is a critical year-end task that, when handled proactively in December, can prevent last-minute stress and potential penalties. By diligently gathering W-9s, reviewing payment data, and utilizing the right tools, your company can confidently meet its IRS obligations and start 2026 on solid ground. Don’t let compliance be an afterthought – make it a priority!