January 2026 – Forms 1099, W-9 & Bookkeeping Best Practices

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January 2026 – Forms 1099, W-9 & Bookkeeping Best Practices

FORMS 1099

Stay Ahead of Key Deadlines and Avoid Penalties

As we come to the end of the year and approach the 1099 filing season, it is crucial to stay informed about important deadlines, recent regulatory updates, and potential penalties to ensure compliance and avoid unnecessary costs for yourself and your business.

This newsletter highlights the new rules and filing deadlines regarding Forms 1099 (NEC, MISC, K) and W-9 to help you stay on top of your reporting obligations and avoid potential penalties. Note: We have observed the IRS enforcing penalties on late, or unfiled 1099s. Please see more information on penalties below.

Important Updates

Do 1099s have to be e-filed?

Yes, same as last year. Forms 1099 are information returns and need to be filed electronically via the Filing Information Returns Electronically (FIRE) system.

  • The IRS requires electronic filing (e-file) for businesses filing 10 or more information returns.
  • Businesses filing fewer than 10 forms can still file on paper, but e-filing is encouraged for accuracy and convenience.

Do you need an account to e-file?

Yes, you will need to set up an account to e-file Forms 1099. This can be done in a few ways:

Directly with the IRS through the FIRE System:

  • Requires registration and approval, which can take up to 45 days.
  • FIRE System is primarily used for bulk filers and requires some technical setup.

Using an IRS-Authorized E-File Provider:

  • Many third-party platforms like QuickBooks, Tax1099, or Track1099 offer user-friendly solutions for creating and e-filing forms without needing to deal with the FIRE system directly. This may make it easier to e-file depending on your needs.
  • These platforms often integrate with accounting software and help streamline the process.

For more information about the regulations and the reduced threshold to electronically file, refer to the IRS and Treasury’s final regulations on e-file and the Filing Information Returns Electronically (FIRE) webpages.

Filing Deadlines for Tax Year 2025

Form 1099-NEC (Nonemployee Compensation):

  • Reporting Threshold: Payments of $600 or more to a non-employee during the year.

Deadlines:

  • Recipient Copy: January 31, 2026.
  • IRS Filing: January 31, 2026 (same for paper and electronic filings).
  • Extensions: Extensions are not automatic for 1099-NEC. They are granted only via Form 8809.

Form 1099-MISC (Miscellaneous Income)

Reporting Thresholds: 

  • Rent, royalties, or other income payments: $600 or more.
  • Payments to attorneys: $600 or more.
  • Royalties: $10 or more.

Deadlines:

  • Recipient Copy: January 31, 2026.
  • IRS Filing:
    • Paper: February 28, 2026
    • Electronic: March 31, 2026
  • Extensions: Form 8809 can be submitted for an automatic 30-day extension. A second 30-day extension is possible but requires valid reasoning.

For the latest information about developments related to Forms 1099-MISC and 1099-NEC and their instructions, go to IRS.gov/Form1099MISC or IRS.gov/Form1099NEC.

Form 1099-K (Payment Card and Third-Party Network Transactions):

Reporting Thresholds:

  • Payments Card Transactions: All amounts.
  • Third-Party Network Transactions: Payments exceeding $2,500 (even for a single transaction)

Deadlines:

  • Recipient Copy: January 31, 2026.
  • IRS Filing:
    • Paper: February 28, 2026
    • Electronic: March 31, 2026
  • Extensions: Same as 1099-MISC (Form 8809 for extensions)

More information about Form 1099-K filing requirement thresholds can be found in this IRS News Release and Notice 2024-85.

And additional information and instructions for the forms mentioned above and other information returns can be found in General Instructions for Certain Information Returns.

Form 1099-DA (Digital Asset Proceeds from Broker Transactions):

Reporting Thresholds:

  • Sales of digital assets: All amounts.

Deadlines:

  • Recipient Copy: February 15, 2026. (Due date is March 15 for reporting by trustees and middlemen of WHFITs)
  • IRS Filing:
    • Paper: February 28, 2026
    • Electronic: March 31, 2026

More information about Form 1099-DA filing requirements can be found on the IRS website.

LOOKING FORWARD TO 1099 PREPARATION FOR 2026

Starting January 1, 2026, the reporting threshold for Forms 1099-NEC and 1099-MISC will increase from $600 to $2,000 for payments made on or after January 1, 2026.

The threshold for 1099-K has been permanently set to $20,000 and over 200 transactions.

There are no changes for the 2025 reporting year, but this will have a large impact on filings for the 2026 tax year.

FORM W-9

As we look towards 2026 tax filing season and begin preparing and filing 1099s for 2025, we wanted to send a friendly reminder regarding the importance of collecting Forms W-9 from all non-employees and contractors who provided services to your business in 2025 and who will begin providing services in 2026.

It is best practice to collect Forms W-9 no later than the date you pay the non-employees or contractors for their services.

  • Form W-9 is filled out by the non-employee/contractor at your request and then retained for your records.
  • Having a Form W-9 from each non-employee/contractor on file streamlines the 1099 filing process in the following ways:
    • Form W-9 will indicate if the vendor or contractor needs a 1099 issued to them.
    • Form W-9 also includes the contractor’s name and business name, type of entity, and the tax identification number, all of which are included and needed on Forms 1099.
    • If we are preparing your 1099s, we will also request copies of all Forms W-9 on file to assist in determining which of the non-employee/contractors need 1099s issued to them.

Please feel free to reach out to us with any questions on Form W-9 and we will be happy to assist you.

Understanding Penalties for Non-Compliance

Over the last several years, the IRS has increased the enforcement efforts for Form 1099 compliance. Timely and accurate reporting of information returns is essential to avoid costly penalties. Here is an overview of the penalties from this past year:

  • If forms are filed within 30 days after the deadline, the penalty is $60 per form.
  • Filing after 30 days but before August 1 increases the penalty to $130 per form.
  • Forms filed after August 1 incur a penalty of $330 per form
  • And in instances of intentional disregard can result in fines of at least $660 per form.

These penalties may be subject to changes for the upcoming tax filing season.

Failing to collect a valid Form W-9 from a payee can lead to penalties. A penalty is imposed on the payee-the individual or entity receiving payment-for failing to provide the payer with a taxpayer identification number (TIN). However, when a payee fails to provide the required information, the payer must initiate backup withholding at a rate of 24% on payments to the payee until a valid TIN is provided.

If the payer fails to implement backup withholding when required or neglects to request a valid TIN, the payer becomes liable for the uncollected backup withholding amount, along with potential additional penalties.

This information is detailed in the IRS’s Instructions for the Requester of Form W-9.

For more detailed guidance on penalties related to information return compliance, the IRS provides a comprehensive resource outlining the requirements, penalty amounts, and ways to address issues if you receive a notice. This includes information on filing deadlines, reasonable cause waivers, and options for paying penalties. To learn more, visit the official IRS page on Information Return Penalties.

BEST PRACTICES FOR COMPLIANCE

Navigating the different complexities of 1099 compliance can seem daunting, but with the right tools, preparation, and understanding of the rules, you can meet any obligations with ease. Staying informed of important deadlines, leveraging our team as a resource, and adopting best practices will help you avoid costly penalties and streamline your reporting process.

Our team will be here to support you every step of the way, from clarifying the latest regulations to assisting with filing strategies tailored to your business needs.