January is a strange month for founders. You start the year with ambitious growth goals, only to be immediately dragged down by the anchor of tax compliance.
The most urgent deadline isn't your income tax return (due in April); it is your Information Returns (1099s), due January 31st.
If you hired a contractor, a freelancer, or a consultant last year, the IRS expects you to report exactly how much you paid them. Fail to do this, and you face penalties that scale with every day you are late. Worse, without these forms, the IRS can disallow the deduction for that labor expense -- meaning you pay taxes on money you already spent.
Here is the operational checklist to clear the desk by January 31st.
1. The Filter: Who Actually Gets One?
You do not need to send a 1099 to everyone you paid. You only send one if ALL three conditions are met:
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The Threshold: You paid them $600 or more during the calendar year.
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The Method: You paid them via Check, Cash, Wire, or ACH. (See "The Credit Card Exception" below).
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The Classification: They are NOT a Corporation.
- The Rule: Generally, you do not send 1099s to C-Corps or S-Corps. You do send them to Sole Proprietors, Partnerships, and LLCs (unless they tax as S/C-Corps).
- The "Lawyer" Exception: You must always send a 1099 to an attorney for legal services, even if they are incorporated.
2. The Form: NEC vs. MISC
Since 2020, the IRS has split the old 1099-MISC into two distinct forms. Using the wrong one is a common error.
- Form 1099-NEC (Non-Employee Compensation): This is for labor. If you paid a developer, a designer, a consultant, or a cleaner, use this form. This is 95% of founder use cases.
- Form 1099-MISC (Miscellaneous Information): This is for passive payments. Use this for rent (paid to a landlord), royalties, or legal settlements.
3. The Data: The W-9 (The "Passport")
You cannot file a 1099 without the recipient's Tax ID (SSN or EIN).
- The Best Practice: "No W-9, No Check." Make it a policy to collect a signed Form W-9 before issuing the first payment.
- The "Chase": If you didn't do this, you are now in the "January Chase," emailing contractors who have no incentive to reply. If they refuse to provide it, you are technically required to begin "Backup Withholding" (withholding 24% of future payments to send to the IRS).
4. The "Credit Card" Exception (Save Yourself Time)
This is the most overlooked rule that saves founders hours of work.
- The Rule: If you paid a contractor via Credit Card, Debit Card, or Third-Party Network (PayPal, Upwork, Stripe), do not file a 1099.
- The Reason: The payment processor (e.g., PayPal) is already required to file a 1099-K reporting those payments. If you file a 1099-NEC too, you are double-reporting the income, which will likely trigger an IRS audit notice for your contractor.
5. The International Rule (W-8BEN)
Did you hire a developer in Brazil or a designer in Ukraine?
- The Rule: If the contractor is a non-US person and the work was performed entirely outside the US, you do not file a 1099.
- The Proof: Instead of a W-9, collect a Form W-8BEN. Keep this on file to prove to the IRS why you didn't issue a 1099.
The Verdict
The deadline for filing Form 1099-NEC with the IRS and sending copies to recipients is January 31st.
- Do not paper file. As of 2026, the electronic filing threshold is practically zero. You must e-file.
- Use a Platform. Do not try to fill out PDFs manually. Use payroll providers (Gusto, Rippling) or dedicated filing tools (Track1099, Tax1099) to batch process your filings.