1099 Forms: The January Deadline That Sneaks Up Every Year

January 15th. You’re closing out the holidays, planning the new year. Then it hits you: 1099 forms are due in two weeks.

You need W-9s from contractors you paid eight months ago. You need to verify addresses. You need to figure out which payments count and which don’t. And if you miss the deadline, penalties start at $60 per form.

Every year, this catches Houston business owners off guard. It shouldn’t.

What 1099s Actually Do

A 1099 is an IRS information return. It reports payments you made to non-employees: contractors, freelancers, landlords, and certain service providers.

The logic is simple: you tell the IRS you paid someone $5,000. They tell the IRS they received $5,000. The IRS cross-references. If the numbers don’t match, someone gets a letter.

Unlike W-2s for employees, 1099s don’t involve tax withholding. The recipient handles their own income tax and self-employment tax on the amounts reported.

The Types That Matter for Small Businesses

There are 20+ varieties of 1099 forms. Most small businesses only deal with a few:

1099-NEC (Nonemployee Compensation)

This is the big one. Use 1099-NEC to report payments of $600 or more for services performed by non-employees:

Independent contractors
Freelancers
Consultants
Attorneys (for legal services)
Subcontractors

If you paid a graphic designer $2,500 for your website redesign, they get a 1099-NEC. If you paid a consultant $800 for strategy work, they get a 1099-NEC.

Threshold: $600 or more during the calendar year, total.

1099-MISC (Miscellaneous Income)

Use 1099-MISC for other payment types:

Rents paid ($600 or more)
Prizes and awards ($600 or more)
Medical and health care payments ($600 or more)
Payments to attorneys for settlements ($600 or more)

If you rent an office from an individual landlord for $2,000/month, they get a 1099-MISC. If you rent from a property management company, check their entity type.

1099-K (Payment Card and Third-Party Networks)

Payment processors like PayPal, Stripe, Square, and Venmo Business issue these when transactions exceed $5,000 annually. The payment processor sends them, not you.

Important: If you paid a contractor through PayPal and PayPal sends them a 1099-K, you don’t also send a 1099-NEC. That would be double-reporting.

Who Gets a 1099-NEC?

Issue a 1099-NEC when all these conditions are met:

You paid $600 or more during the calendar year
Payment was for services performed for your trade or business
Recipient is not an employee (employees get W-2s)
Recipient is not a corporation (with exceptions below)

The Corporation Exception

Generally, corporations don’t get 1099s. But there are exceptions:

Always send 1099s to:

Attorneys and law firms (regardless of corporate status)
Medical and health care providers (regardless of corporate status)

A Houston business paid their corporate attorney $8,000 for contract review? Send a 1099-NEC.

Payments That Don’t Require 1099s

Payments for merchandise, freight, or storage
Payments to corporations (except attorneys and medical providers)
Payments made via credit card, debit card, or payment networks like PayPal
Wages to employees (use W-2)
Rent paid to real estate agents acting as agents for the landlord

That last one trips people up. If you pay rent to ABC Property Management acting as agent for the building owner, you typically don’t issue a 1099 to the management company.

Collecting W-9s: The Part Everyone Forgets

Before you pay any contractor, collect a completed Form W-9. This provides:

Legal name
Business name (if different)
Address
Taxpayer Identification Number (SSN or EIN)
Entity type (individual, LLC, corporation, etc.)

The critical mistake: Waiting until January to collect W-9s.

In January, you’ll be chasing contractors who may have moved, changed phone numbers, or simply don’t respond to your emails. Some won’t return your calls at all.

Collect the W-9 before the first payment. Make it part of your onboarding process. No W-9, no payment.

When They Refuse to Provide a W-9

If a contractor refuses, you’re required to:

Withhold 24% of the payment as backup withholding
Remit the withheld amount to the IRS
Report the payment and withholding on Form 1099

Most contractors will suddenly find time to complete a W-9 when they understand the alternative.

2026 Filing Deadlines

Form	Deadline to Recipient	Deadline to IRS (Paper)	Deadline to IRS (Electronic)
1099-NEC	January 31, 2026	January 31, 2026	January 31, 2026
1099-MISC (standard)	January 31, 2026	February 28, 2026	March 31, 2026

Note the 1099-NEC deadline: January 31 for everything. No extensions. No grace period.

If January 31 falls on a weekend or holiday, the deadline moves to the next business day.

Penalties for Getting It Wrong

The IRS takes 1099 compliance seriously. Penalties for late or missing forms:

If Filed…	Penalty Per Form (2026)
Within 30 days of deadline	$60
More than 30 days late, before August 1	$130
After August 1 or not filed	$330
Intentional disregard	$660 (minimum)

A Houston contractor who paid 12 subcontractors and missed the filing entirely? Potential penalty of $3,960.

Small business cap: If your average annual gross receipts are $5 million or less, maximum penalties are limited. But that’s cold comfort when you’re writing the check.

How to File 1099s

Step 1: Gather Information

Review your accounting records. Identify all payments to non-employees exceeding $600. Pull W-9s for each.

If you don’t have a W-9, start chasing now.

Step 2: Verify Accuracy

Confirm names, addresses, and TINs match what’s on file. Incorrect information triggers IRS notices that waste everyone’s time.

Use the IRS TIN Matching program to verify TINs before filing. A mismatched TIN will generate a CP2100 notice.

Step 3: Prepare Forms

Options for preparation:

IRS FIRE system: Free, but requires registration
Accounting software: QuickBooks, Xero, and others can generate and file
Third-party services: Tax1099, Track1099, and similar services streamline the process

Step 4: Distribute and File

Send Copy B to recipients by January 31. File Copy A with the IRS by the deadline (electronic filing strongly recommended for 10+ forms).

Common Mistakes That Trigger Problems

Mistake 1: Issuing to Corporations

Review W-9s carefully. If the entity type shows “C Corporation” or “S Corporation,” you generally don’t issue a 1099, unless they’re an attorney or medical provider.

An LLC taxed as an S-Corp? Still a corporation for 1099 purposes. No form required.

Mistake 2: Double-Reporting Credit Card Payments

Payments made via credit card, debit card, or PayPal are reported by the payment processor on 1099-K. Don’t also send a 1099-NEC.

A Houston marketing agency paid a contractor $3,000 via PayPal and $2,000 by check. They issue a 1099-NEC for $2,000, not $5,000.

Mistake 3: Forgetting Small Payments Add Up

Multiple small payments to the same contractor count. $200 in March, $250 in July, $300 in November = $750 total, which exceeds the $600 threshold.

Your accounting software should aggregate payments by vendor. Review the totals, not individual transactions.

Mistake 4: Wrong TIN

Mismatched TINs trigger IRS CP2100 notices. These create hassle for you and the contractor. Verify TINs through the IRS TIN Matching program before filing.

Building a System That Works

The January scramble happens because 1099 compliance gets ignored until the last minute. A better approach:

When you hire a contractor:

Collect W-9 before first payment
Verify TIN through IRS matching
Set up vendor in accounting software with correct entity type

Quarterly:

Review contractor payments year-to-date
Identify anyone approaching or exceeding $600
Chase missing W-9s while there’s still time

December:

Run preliminary 1099 report
Verify all information is current
Prepare forms for January filing

January:

File on time
Move on with your year

Getting Help

1099 filing seems straightforward until you’re tracking dozens of contractors, chasing missing W-9s, and trying to distinguish which payments require reporting through which forms.

At EZQ Group, we handle 1099 compliance as part of our bookkeeping and tax services. We track contractor payments throughout the year, collect W-9s at onboarding, and file accurate 1099s before the deadline.

Questions about your 1099 obligations? Contact us before January catches you off guard.

This article provides general information and is not tax advice. Tax situations vary, and you should consult with a qualified tax professional about your specific circumstances.