Tax Season Begins: Don’t overlook 1099 Filing

As tax season gets underway, many businesses focus their attention on income tax filings and year-end planning while overlooking one of the earliest and most important compliance requirements of the year: filing Forms 1099. Each January, businesses are required to report certain payments made during the prior year, and missing this step can lead to unnecessary penalties and administrative issues.

Forms 1099 are used to report non-employee compensation and other qualifying payments made in the course of business. Most commonly, this includes payments to independent contractors, consultants, and service providers who are not treated as employees. Even businesses with relatively few transactions or limited activity may still have an obligation to file, making it important not to assume the requirement does not apply.

One reason 1099 compliance is frequently mishandled is the timing. Forms 1099-NEC must be provided to recipients and filed with the IRS by January 31, a deadline that arrives much earlier than most income tax filing dates. Unlike tax returns, there is little flexibility to correct issues once the deadline has passed, especially if required information was never collected.

Common problems tend to surface late in the process. Businesses may discover that a contractor never provided a completed Form W-9, that a taxpayer identification number is missing or incorrect, or that certain payments were misclassified. These issues are far easier to resolve when identified early, rather than days before the deadline.

It is also important to remember that the responsibility to file Forms 1099 rests with the business making the payment. Whether a contractor is incorporated, claims to handle their own taxes, or expects to report the income independently does not remove the payer’s reporting obligation. Assumptions in this area often lead to compliance gaps.

Penalties for late or incorrect 1099 filings can add up quickly, as they are generally assessed on a per-form basis and increase the longer the filing is delayed. Beyond monetary penalties, errors can also result in follow-up notices and added scrutiny, creating distractions that extend well beyond the filing season.

Addressing 1099 obligations early allows businesses to review payment records, request missing information, correct classifications, and submit filings with confidence. Taking this step now can set a smoother tone for the rest of tax season and help avoid avoidable compliance issues.