Preparing Form 1099-NEC From Your Books

Mark vendors during the year

In your accounting software, flag the vendors who may receive a form and enter their name, address and taxpayer ID from the W-9. Most programs can then total payments for you. Without that flag, you must rebuild the list by hand.

Do this when you first set the vendor up. A vendor created in March with no W-9 will be a problem in the following January.

Run the vendor payment report in early January

Run the report for the calendar year, using the payment date rather than the bill date. The rules turn on payments actually made in the year. Review it line by line. Check that payments to a corporation, to employees, or reimbursed personal expenses are not mistakenly included, but be careful: whether a payee is exempt is a question for your preparer.

Compare the total to the amounts shown in your expense accounts. Differences usually point to a payment coded to the wrong place or to a different account.

Which payments appear in the report

Generally, payments for services by non-corporate payees in the course of your business are reported when they reach the filing threshold. The threshold has changed over time, so verify the current one. Payments for goods are usually not reported on this form. Rent, interest and other types have their own forms.

Payments made by credit card or through a payment network are typically reported by the processor, not by you. See our guide on payment apps and 1099 reporting.

Resolve missing information

For vendors with missing forms, send a polite request with a deadline, and explain that you need the information to file. Keep copies of every request. The IRS provides a way to check names and numbers before filing, which helps avoid mismatch notices.

If the vendor still refuses, discuss with your preparer how to proceed and whether backup withholding applied.

File, deliver and keep copies

The recipient copy and the IRS copy have due dates that are usually in January, but confirm the current dates. You may file with software or through an authorized provider. Keep copies of the filed forms and the confirmation. If you filed with a state, keep that confirmation as well.

Reconcile what you filed to the books one last time, then record any corrections as soon as they come up. Corrected forms exist for errors.

A January timeline that works

In the first week, finish December bookkeeping and run the vendor report. In the second, chase missing forms and check names and numbers. In the third, enter the data into your filing software and review it with your preparer. Leave the last days before the deadline for emergencies, not for ordinary work.

If you hire a bookkeeper, ask for the vendor report in mid-December so the first week of January is not a scramble.

Worked example with numbers

Run the vendor payments report for the year. Vendor A shows $4,200 by check and $900 by card, vendor B $1,350 by check. Card payments are generally reported by the processor, so the reportable amount for vendor A is the $4,200 of non-card payments and vendor B is $1,350. Check each against the current IRS threshold and instructions before filing.

Mistakes that cost money

Using the wrong total, including card payments or reimbursed expenses. Missing a W-9. Filing after the deadline. Mislabeling a payment type.

Check your work

Compare the sum of reportable amounts to the contractor expense accounts, and explain the difference.

Common questions

This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation.