If your business paid $600 or more to a non-employee during the tax year for services, you are required to file a 1099-NEC for that person or entity. This applies to independent contractors, freelancers, consultants, and any other worker who is not on your payroll. Payments to corporations (both C-corps and S-corps) are generally exempt, with a few exceptions like legal services. The form reports what you paid them so the IRS can match it against what they report on their own return.

The filing deadline is January 31. That is the date by which you must both deliver copies to your recipients and file with the IRS. Unlike many other tax forms, there is no automatic extension available for the 1099-NEC. If January 31 falls on a weekend, the deadline moves to the next business day, but that’s the only flexibility you get.

If you are filing 10 or more information returns in total for the year, the IRS requires you to file electronically. You can e-file through the IRS IRIS portal at no cost, or through your accounting software or a third-party service. Paper filing is still allowed if you have fewer than 10 forms, but electronic filing is faster and gives you confirmation that the IRS received everything.

The most important thing you can do to make filing painless is collect a W-9 from every contractor before you pay them. The W-9 gives you their legal name, address, taxpayer identification number, and entity type. Getting this upfront saves you from chasing people down in January when they are less motivated to respond. If a contractor refuses to provide a W-9, you are actually required to withhold 24% of their payments as backup withholding.

Penalties for late filing start at $60 per form if you file within 30 days of the deadline and increase from there. File more than 30 days late but before August 1 and the penalty jumps to $130 per form. After August 1 or if you don’t file at all, it goes up to $310 per form. For small businesses filing fewer than a certain number of returns, there are lower maximum caps, but the per-form penalties still add up quickly when you have multiple contractors.

A few common mistakes to avoid. Don’t issue a 1099-NEC for payments made through credit card or payment processors like PayPal, Venmo (business), or Stripe. Those payments get reported on a 1099-K by the processor, so reporting them again on a 1099-NEC creates a duplicate. Also, don’t issue 1099s for payments to employees. Employee wages go on a W-2, not a 1099.

If you have contractors you pay regularly, tracking those payments throughout the year is far easier than trying to reconstruct totals in January. Your Houston fractional CFO or bookkeeper should be tagging contractor payments as they happen so the numbers are ready when filing season arrives.

For businesses with multiple contractors, outsourcing 1099 preparation can save significant time and reduce the risk of errors or missed deadlines. The filing itself is straightforward once the data is clean, but getting the data clean is where most business owners struggle.