1099-NEC Filing Basics for Small Accounting and Bookkeeping Firms

If your firm paid any contractor, freelancer, or subcontractor $600 or more in a calendar year for services, you're generally required to send them a Form 1099-NEC, and file a copy with the IRS. This applies to your own firm's vendors (a contract bookkeeper you brought in during busy season, a freelance designer) just as much as it applies to your clients' businesses.

Who needs one

The $600 threshold applies per recipient, per year, for nonemployee compensation, payments for services, not goods, from someone who isn't your W-2 employee. The most common misses: a part-time contract bookkeeper paid in monthly installments that add up past $600, a freelance developer who built your client portal, or a referral fee paid to another practitioner. Payments to corporations are typically exempt (with a few exceptions like attorney fees), which is why collecting a completed Form W-9 from every contractor before you pay them the first time saves you from guessing at year-end.

The deadline that catches people off guard

Unlike most IRS forms, Form 1099-NEC has a single, firm deadline: January 31, both for furnishing the copy to the recipient and for filing with the IRS, whether you file on paper or electronically. There's no automatic 30-day extension available for 1099-NEC the way there is for some other information returns. Filing late can trigger penalties per form, scaled by how late the filing is, so this is worth calendaring separately from your firm's own tax deadlines.

How to actually file

The IRS's official reference for information returns, including when a 1099 is required and how to file it, is the "Am I Required to File a Form 1099?" page. For firms filing 10 or more information returns total across all types in a year, e-filing through the IRS's Information Returns Intake System (IRIS) is now mandatory rather than optional; paper filing is limited to firms below that threshold.

Common mistakes worth avoiding

• Sending a 1099-NEC to a corporation when the payment was exempt, wastes time on both ends
• Using a contractor's business name instead of the legal name and TIN listed on their W-9, causes IRS mismatch notices later
• Missing a contractor entirely because payments were split across several small invoices that individually looked under threshold
• Filing the recipient copy on time but forgetting the IRS copy, both are required, separately

The bottom line

Collect a W-9 before the first payment, track contractor payments in one place all year instead of reconstructing them in January, and treat January 31 as a hard deadline with real per-form penalties attached, not a soft target.