Everything You Need to Know About 1099 Filing This Tax Season

Finance and accounting teams feel the squeeze at the end of every calendar year. Once the rush is over—buttoning up accounts, chasing down invoices and payments due, and closing the books—the clock starts for tax season. 

The IRS requires all 1099 forms to be provided to contractors by January 31. For companies that run on independent contractors, January is often a race against the clock to create, file, and deliver 1099-NEC forms on time. Failure to do so risks significant costs and can damage contractor relationships.

We spend a lot of time talking to finance and operations leaders from companies that rely on 1099 contractors to understand what a successful 1099 filing looks like:

• When do companies need to provide a 1099 form?
• What kind of 1099 form do I need?
• The biggest 1099-NEC challenges for employers
• An overview of 1099-NEC filing requirements
• Can a company get 1099-NEC filing extensions?
• How to simplify your 1099 filing this tax season

Download our free guide to 1099 filing: Everything You Need To Know About 1099 Filing This Tax Season, or read on for more info about how you can make this time of year less stressful and more streamlined for your finance team.

Here’s what you need to know this tax season:

When do companies need to provide a 1099 form?

If you’re working with a contractor, consultant, or freelancer, you likely need to provide a 1099 form if you’ve paid a contractor directly more than $600 in a calendar year and they are not an employee of your business. 

You’re required to file a 1099 from if you’ve been paying for services from:

• Someone who is not your employee, including individuals, government agencies, and nonprofit organizations
• Attorneys, including law firms or other providers of legal services
• Corporations providing legal services
• Individuals from whom you have withheld federal income tax under the backup withholding rules

Generally, you don’t have to issue these forms for:

• Payments made to C Corporations and S Corporations
• Payments made via credit card, debit card, or a third-party system, like PayPal, but only if those payments were processed as business transactions
• However, even if your situation aligns with these criteria, we strongly advise you to consult a lawyer to ensure compliance.

If your work engagement meets these requirements, then you must provide a 1099 form to them by no later than January 31 to avoid information return penalties. While 1099 forms can be submitted both online and on paper, the IRS encourages payers to switch to electronic filing—new regulations require payers to e-file 10 or more information returns beginning in 2024. 

What kind of 1099 form do I need?

To make matters even more confusing, there are two different kinds of 1099 forms: 1099-NEC and 1099-MISC. If you’re working with a contractor, you probably need a 1099-NEC.

Form 1099-NEC is frequently discussed alongside Form 1099-MISC—you’ll even see statements that one replaced the other—but they’re used for two different scenarios. That’s because in 2020, the 1099-MISC was used for reporting all forms of non-employee compensation until the reintroduction of the 1099-NEC form. The new form took over the non-payroll worker compensation box from the 1099-MISC and narrowed its scope. Businesses are now required to file Form 1099-MISC solely for reporting miscellaneous payments such as rent, royalties, legal settlements, and reimbursements. 

The biggest 1099-NEC filing challenges for employers

The 1099 filing season is one of the most demanding times for finance teams. Without a streamlined and automated process in place, finance leaders find themselves grappling with a series of formidable challenges from December through February.

Manual tasks make the filing process take too much time

The multitude of manual tasks will devour your team members’ time. One finance and operations leader told us they have an employee who spends half of her time in January sending—and fixing—1099s to contractors. The administrative chaos of manual filing for hundreds or thousands of contractors means you’ve got your team running around in circles on 1099s instead of focusing on their day-to-day tasks. 

The IRS has strict requirements—and penalties

Failure to issue Form 1099-NEC by January 31 can result in significant costs, with the IRS imposing penalties ranging from $60 to $330 per form in 2025. The IRS also charges penalties for each incorrect payee statement, regardless of whether it was or wasn’t submitted on time. 

For instance, if you misplace a comma or dash in the address or submit a wrong TIN in the reported data and don’t correct the mistake by August 1, a penalty of $330 per form will apply. Intentional disregard of 1099 filing is even more serious, with a minimum penalty of $660 per form.

Outsourcing your 1099-NEC filing process can be costly

The alternative to running this process manually is to rely on outsourcing companies to save time and ensure compliance. However, this convenience comes at a steep price. We’ve spoken with financial leaders who report they spend $30,000 to $40,000 annually with vendors exclusively for 1099 processing. 

Ready to file? We’ve put together a comprehensive guide on Everything You Need To Know About 1099 Filing This Tax Season. Get the free download >

What does successful 1099-NEC filing look like? 

How to handle the 1099-NEC filing process:

1. Request a completed Form W-9 from individual contractors to collect information like legal names, addresses, taxpayer identification numbers (TINs), and federal tax classification.
2. Verify TINs through the TIN Matching Program.
3. Access payment records to calculate the full amount of the payment the non-employee received during the year.
4. E-file your information returns by completing 1099-NEC forms for each independent contractor, manually transferring the data from your records.
5. Send Copy A of the form to the IRS and Copy B to the respective contractor by January 31.

From reaching out to contractors to manually verifying and entering the data, it takes a significant amount of manual effort to gather and accurately file the required information.

Can a company get 1099-NEC filing extensions?

The IRS highlights that there’s no automatic extension to file a 1099-NEC. However, a business may request a 30-day filing extension under one of the following hardship conditions:

• A catastrophic event in a federally declared disaster area that made it impossible to resume operations. 
• Business operations were disrupted by a fire, casualty, or natural calamity.
• The individual responsible for filing the form was unable to return the information because of death, serious illness, or unavoidable absence.
• The information required for 1099-NEC filing, like Schedule K-1 or Form 1042-S, wasn’t provided in time.
• The business is in the first year of establishment.

In case of any of these events, the extension may be granted upon submitting Form 8809 on paper or e-filing it before the filing due date. But filing for an extension takes time—and waiting until the last minute to file for an extension could result in a tangle of paperwork and even more headaches.

How to simplify your 1099 filing this tax season

Instead of running manual processes that break down, purpose-built tooling like Wingspan offers a single platform that automates the full contingent work lifecycle, making it easy to bill clients, onboard and pay contractors, and file 1099s. 

“This change may eliminate errors and subsequent IRS penalties with regards to 1099 tax filings that we have experienced over the past several years due to ADP field limitations. It would also mitigate human data entry error that is compounded given the number of IC’s payments and profiles that we process and create.” - Ryan Parker, VP of Finance, Emerging Markets at AFIRM

With Wingspan, you can:

• Real-time W9 collection and TIN verification: Automatically request W-9s and cross-check TINs with the IRS database.
• Create 1099-NEC forms with one click: Auto-calculate payment totals from past transactions, integrated with financial tools to pull imported payments data.
• Files and delivers 1099-NEC forms: Once your 1099-NEC forms are ready, Wingspan delivers them directly to contractors and e-files the documents with the IRS and state agencies. 

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See how Wingspan can streamline your 1099 filing process > 

Switch to Wingspan by December 31st and get free 1099 filing in 2024.

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