1099 Cleanup Before January Wrecks Your Weekend

Written By Stoy Hall

You’re not dodging this. If you paid contractors this year, January will either be clean and calm—or an avoidable mess. The difference? Whether you do the 1099/W-9 cleanup now. This isn’t busywork; it’s risk management with receipts. Let’s lock down your vendor list, stop bad payments before they happen, and set up automations so you’re not chasing forms while everyone else is watching bowl games.

I’ll give you the rules that matter, the thresholds that trip people up, and a punch-list you can run weekly until filing is done. Fair warning: I’m direct because penalties are real.

Profit move #1: Scrub your vendor list and fix missing W-9s

A clean 1099 season starts with a clean vendor file. Do this in order:

  1. Export the 2025 vendor/payee list from your accounting system. Include legal name, EIN/SSN, entity type, email, total paid, and payment method (check/ACH vs card/app).

  2. Flag anyone paid for services ≥ $600 (cumulative) who isn’t an employee. That’s your base 1099-NEC group. (Yes, there are exceptions; we’ll handle them below.)

  3. Separate “no-1099” payment rails. If you paid a vendor by credit card or a third-party network (think PayPal/Venmo merchant processing), those are typically reported on Form 1099-K by the payment platform—you generally do not issue 1099-NEC/MISC for those specific transactions. ACH and checks still count as your responsibility.

  4. Zelle isn’t a TPSO. It’s bank-to-bank. If you used Zelle to pay a contractor, assume you still have the 1099 duty for those payments.

  5. Chase W-9s now—before the next payment. No W-9, no money. Period. If a payee won’t give a correct name/TIN, you’re on the hook for 24% backup withholding and Form 945. Start that the moment the TIN is missing/incorrect.

  6. Use TIN Matching (free via IRS e-Services) to catch name/TIN mismatches before you file. Do interactive for one-off checks or bulk for the whole list.

  7. Accept e-signed W-9s correctly. Electronic W-9s are fine if they meet the IRS’s requester rules (affirmative electronic consent, proper perjury statement, etc.). Store the PDF + timestamp with your vendor record.

Bottom line: W-9s first, TIN-match second, payment third. Reverse that and you’re volunteering for penalties.

Know your forms, thresholds, and the tricky exceptions

Here’s the fast map most owners need:

  • Form 1099-NEC (Box 1, Nonemployee Compensation)
    Services to nonemployees at $600+ in your trade or business. Most classic contractors live here.

  • Form 1099-MISC (selected boxes):
    • Rents (Box 1) at $600+
    • Royalties (Box 2) at $10+
    • Medical & health care payments (Box 6) at $600+ — even if the provider is a corporation
    • Gross proceeds paid to attorneys (Box 10) — even if the law firm is a corporation
    These “corporations are exempt” myths cost people real money. Don’t fall for them.

  • Payments via credit card or third-party networks (TPSOs like PayPal/Venmo merchant processing) are reportable on 1099-K by the processor—not by you on 1099-NEC/MISC for those transactions. Your check/ACH/Zelle still require your 1099 when applicable.

  • 1099-K thresholds you’ll hear about (context matters): For TPSO-reported payments: IRS transition relief sets thresholds at $5,000 for 2024, $2,500 for 2025, and $600 from 2026 forward. This affects what the platform reports—not your duty on non-TPSO payments.

Quick decision rules you can steal:

  • Paid by check/ACH/Zelle for services? Likely your 1099-NEC if ≥ $600.

  • Paid by business credit card or a TPSO? Likely their 1099-K for those card/app transactions; you skip NEC/MISC on those specific payments.

Deadlines you can’t miss (and who gets what, when)

  • 1099-NEC: Due to recipients and the IRS by January 31 (next business day if it falls on a weekend/holiday). File electronically.

  • 1099-MISC: Furnish recipient copies by January 31. File with the IRS by Feb 28 (paper) or Mar 31 (e-file). (Certain boxes like 8 or 10 have mid-February recipient due dates in some years; check the current-year instructions.)

  • If you file 10 or more information returns in aggregate, you must e-file. (This isn’t per form type; it’s the combined count.) Use IRIS—it’s free.

Penalties—how ugly does this get?

The IRS sets penalties per return, scaled by how late you fix it:

  • $60 if you correct within 30 days after the due date

  • $130 if corrected by August 1

  • $340 if after August 1 or not filed at all

  • Intentional disregard: $680+ per return, no maximum
    There are separate penalties for failing to furnish correct recipient statements. Don’t split hairs—file on time, furnish on time.

Automations that do the chasing for you

Get this off your brain and into systems:

  1. AP gatekeeping rule: Add “W-9 on file + TIN-matched = payable.” No exceptions.

  2. Automated W-9 requests: Use your accounting platform or a secure form tool to send W-9 requests with e-signature, log reminders, and write back to the vendor record. The request email should announce the backup withholding consequence if they stall. (Truth motivates.)

  3. Bulk TIN Match monthly: Upload your full payee list once a month through IRS TIN Matching (bulk) and fix mismatches before January.

  4. IRIS e-file setup now: Don’t wait until January to register. IRIS lets you create/import 1099s, submit, and get acknowledgments without third-party software. It also supports Combined Federal/State routing for many forms/states.

  5. Electronic delivery consent flow: If you plan to furnish 1099s electronically, capture affirmative consent that proves the recipient can access the form in that format, and keep it on file. If they don’t consent, mail it.

Spot bonuses & referral payouts: which form?

  • One-off spot bonuses to contractors for services → 1099-NEC if total NEC for the year ≥ $600.

  • Referral “thank-you” not tied to services → potentially 1099-MISC (Box 3) if ≥ $600; if they performed services, it’s NEC.

When in doubt, ask: “Was this for services?” If yes, NEC all day.

The gotchas that wreck Saturdays

  • “They’re an S-Corp, so no 1099.”
    Usually true for NEC, but not for attorney fees (NEC) or gross proceeds to attorneys (MISC) or medical/health care payments (MISC). Corporations don’t shield you in these boxes.

  • Paid with card/apps?
    Those card/app transactions are someone else’s 1099-K. Don’t double-report. Your check/ACH/Zelle still trigger your 1099s.

  • No W-9, but you paid anyway.
    Start 24% backup withholding on the next payment and send Form 945 for the withheld tax. Also, keep soliciting a correct W-9.

  • E-file threshold
    Ten total info returns (across all types) = must e-file. Don’t mail them.

Implementation: a simple weekly cadence (30–45 minutes)

Week 1 (now):

  • Export vendor list, segment NEC/MISC by threshold and payment rail.

  • Email W-9 requests to everyone missing data; set auto-reminders every 5 business days.

  • Enroll in IRS e-Services and TIN Matching.

  • Register for IRIS and run a test import.

Weeks 2–4:

  • Bulk TIN-match all vendors; fix mismatches immediately.

  • Lock your AP policy: no W-9 + pass TIN Match = no payment.

  • Tag vendors paid by card/TPSO so you don’t NEC/MISC those specific transactions.

  • Capture e-delivery consent from contractors who want electronic copies; everyone else stays paper.

First week of January:

  • Freeze vendor changes except critical updates.

  • Generate drafts in IRIS for all 1099-NEC and 1099-MISC. Validate names/TINs again.

Mid-January:

  • Furnish recipient statements (electronic for those who consented; mail the rest).

  • E-file 1099-NEC by Jan 31 and schedule MISC filing for Mar 31 (e-file).

February–March:

  • Track any returned mail and re-furnish promptly.

  • File 1099-MISC by the IRS e-file due date.

Owner checklist (print this)

  • Every active vendor has a W-9 on file (securely stored)

  • All vendors TIN-matched; mismatches resolved

  • AP blocked for vendors missing W-9 or failing TIN match

  • Card/TPSO payments identified and excluded from NEC/MISC reporting for those transactions

  • E-delivery consent captured (or mail queue ready)

  • IRIS account ready; test file uploaded

  • Calendar holds on Jan 31 (NEC) and Mar 31 (MISC e-file) deadlines

Resources (official and high-signal)

  • General Instructions for Certain Information Returns (2025) — due dates, penalties, rules. IRS

  • Instructions for Forms 1099-MISC & 1099-NEC (04/2025) — thresholds, exceptions, 1099-K interplay, and e-file threshold change. IRS

  • Backup Withholding (24%) — when to start, rate, and Form 945. IRS

  • IRS TIN Matching (e-Services) — interactive & bulk name/TIN checks. IRS

  • W-9 Requester Instructions (PDF) — requirements for electronic W-9s and certification language. IRS

  • E-file information returns with IRIS (free) — portal and guides. IRS+1

  • About Form 1099-K — current TPSO thresholds and updates. IRS

  • Zelle FAQ — confirms Zelle doesn’t issue 1099-K (not a TPSO). Zelle

The point

If you do this now, January is just a button-click and a mail-merge. If you don’t, it’s penalties, backup withholding fights, and a weekend you won’t get back. Your choice.

CTA: Book a Power Hour: 1099/W-9 Audit & Email Templates. We’ll clean your vendor file, set up TIN Matching, draft your W-9 chasers, and configure IRIS so you can file on time without drama.

Schedule Here
Stoy Hall https://blackmammoth.com
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