1099 preparation small business owners can do from their own books takes three steps. Pull a report of every vendor paid $2,000 or more during 2026, the new reporting threshold. Collect a W-9 from each one that is missing and sort out which ones are exempt. Then file the 1099-NEC forms with the IRS and send copies to recipients by January 31. Start in November, because the W-9 you cannot get in December is the one that makes January painful.
This guide is for owners who keep their own books in QuickBooks Online or Xero, or who want to know what their bookkeeper should be doing this quarter. It covers the vendor list, the W-9, the exemptions, the threshold change, the filing route, and the handful of California items. The rules on which payments are reportable come from the IRS and we cite them; classification questions and anything beyond the form belong with your CPA. This is the routine we run for every client at Books LA in November.
What changed for 2026: the $2,000 threshold
For payments made during 2026, the 1099-NEC reporting threshold is $2,000 per payee for the year, up from the $600 that applied for decades. Prior years still use $600. The form, the deadline, and the filing method did not change: the IRS due dates page still lists January 31 for furnishing 1099-NEC to recipients and filing with the IRS. The higher threshold removes some small vendors from the list. It does not remove the W-9 habit. Collect one from every contractor at intake regardless of how much you expect to pay. The amount is unknown in January, and the form is impossible to get in February.
1099 preparation small business step by step
- 1. Run the vendor payment report. In QuickBooks Online, the 1099 Transaction Detail report or the contractor report; in Xero, the 1099 report after mapping accounts and contacts. Filter to the calendar year and payments of $2,000 or more. Check that every payment is in it. Contractors paid from the owner’s personal card or through a payroll provider are the usual gaps.
- 2. Exclude what the form does not cover. Payments made by credit card or through a third-party processor such as PayPal goods and services go on the processor’s 1099-K, not on your form. Payments to corporations are generally exempt, with attorneys as the notable exception. Rent, royalties, and a few other categories go on a 1099-MISC rather than the NEC. When a vendor is close to a line, ask your CPA.
- 3. Match each vendor to a W-9. The W-9 gives you the legal name, the tax ID, and the entity type, which decides the corporate exemption. Store it attached to the vendor record. No W-9, no way to file correctly. Backup withholding rules can apply when a vendor refuses, which is a CPA conversation.
Steps 4 to 6: chase, tie, and file
The first three steps build the list. The last three turn it into filed forms.
- 4. Chase the missing ones now. November, with a short note and the form attached. A vendor who ignores you in November will ignore you in January too. The second request is easier when the first went out early.
- 5. Tie the totals. The vendor report should match the subcontractor and professional fee expense accounts on the profit and loss, less the exclusions above. A difference means something was coded elsewhere or paid from outside the books.
- 6. File by January 31. Through the accounting software’s e-file service or the IRS system directly. The IRS retired its FIRE system for information returns in favor of IRIS; our 1099 FIRE to IRIS post covers the change. Send the recipient copies the same day and keep the filing confirmations with the year’s records.
The vendor list: how to build it in November
A clean 1099 list is a by-product of clean books. That is why it is hard in January for a file that was never reconciled. The DIY bookkeeping checklist gets you there: every account reconciled through October, nothing uncategorized, personal spending moved out. Then the vendor report is a report rather than an investigation. Two habits for next year: tag each new vendor as a 1099 vendor or not when you create it, and attach the W-9 the day it arrives.
What goes wrong most
- Paying contractors from the personal card. The payment never enters the business books, so the vendor never makes the list, and the expense is lost too.
- Double-reporting card payments. Payments by card are the processor’s to report on a 1099-K. Including them on your NEC reports the same income twice to the IRS.
- Treating an LLC as a corporation. An LLC taxed as a sole proprietor or partnership is not exempt. The W-9 says which it is; do not guess from the name.
- Using the old threshold. $600 still applies to prior-year filings; $2,000 applies to 2026 payments. Mixing them produces either missing forms or forms nobody needed.
- Waiting for the CPA. Many CPAs do not prepare 1099s unless asked, and January is their busiest month. Ask in November who is filing, and get the answer in writing.
The California layer
California employers who pay independent contractors $600 or more in a year report them to the EDD on the DE 542. It is due within 20 days of the payment or contract, per the EDD’s required filings page. That is a separate, earlier obligation from the 1099, and it uses the old dollar figure. California also follows the federal information return in most cases. So there is usually no separate state 1099 filing when you file with the IRS, but confirm your situation with your CPA. The Q4 bookkeeping checklist has the January dates alongside the rest of the quarter.
How Books LA handles this
In November we send every client their 1099 vendor list with the W-9 gaps marked. We chase the gaps with the client’s permission and tie the totals to the books. In January we file the forms, furnish the copies, and attach the confirmations to the year-end package for the CPA. Classification questions go to the CPA or an employment attorney before the form is filed, not after. Our CPA handoff post shows where the 1099 summary sits in that package, and our Los Angeles bookkeeping services guide explains the monthly service around it.
Frequently asked questions
What is the 1099 threshold for 2026?
$2,000 per payee for payments made during 2026, up from $600. The form is still the 1099-NEC for nonemployee compensation, due to recipients and the IRS by January 31, 2027. Prior-year filings keep the $600 threshold. Collect W-9s from every contractor regardless of the amount.
Do I send a 1099 to a contractor I paid by credit card?
No. Payments by credit card, debit card, or a third-party payment network are reported by the processor on a 1099-K. Include only payments made by check, ACH, cash, or direct bank transfer on your 1099-NEC, so the income is not reported twice.
Do LLCs get a 1099?
It depends on how the LLC is taxed, which the W-9 shows. An LLC taxed as a sole proprietor or partnership gets one. An LLC taxed as a C or S corporation generally does not, except for legal services. Never decide from the vendor’s name alone.
What if a contractor will not give me a W-9?
Document the requests. Backup withholding rules can require you to withhold from future payments, and the form may still need to be filed with the information you have. This is a question for your CPA before the next payment goes out, not a reason to skip the form.
When are 1099s due?
January 31, per the IRS, for both furnishing the 1099-NEC to recipients and filing it with the IRS. For 2026 forms that is Monday, February 1, 2027, because January 31 falls on a Sunday. Confirm the exact date on IRS.gov in January. Start the vendor list in November so the date is a formality.
Does California require a separate 1099 filing?
Usually not for the 1099-NEC when you file with the IRS. But California has its own earlier report, the DE 542 to the EDD. It is due within 20 days of paying or contracting with an independent contractor for $600 or more. Confirm both with your CPA for your situation.
Can my bookkeeper file my 1099s?
Yes. Preparing and filing information returns from the books is bookkeeping work. Most bookkeepers, including Books LA, do it as part of year-end. Classification questions and the tax treatment of payments stay with your CPA. Agree in November on who files, so nobody assumes the other did.
If your vendor list is not a report you can run today, book a short call and we will build it with you before the W-9 chase starts.
This post is general information checked against IRS.gov and the EDD in October 2026. Thresholds and dates change, and the reportability of a given payment is an income tax question for your CPA or enrolled agent. Books LA provides bookkeeping services and does not advise on income tax.
