Filing 1099s : A Step-by-Step Guide for Business Owners

If you’re choosing to file your own 1099s this year, this guide is for you.

We’ve pulled together information you need to know. Including compliance rules, common mistakes, how to track vendors in QuickBooks Online, how to run reports, and where to file.

Think of this as your 1099 roadmap.

First: A Responsibility Reminder

Whether you file 1099s yourself or hire someone else to do them, you are fully responsible for compliance under IRS rules.

That includes:

Determining which vendors require a 1099
Collecting and maintaining W-9s
Filing the correct forms on time
Sending copies to contractors
Responding to IRS notices
Handling backup withholding if required

Even if you work with a bookkeeper, the IRS holds the business owner responsible for 1099 reporting.

Collect a W-9 Before You Pay a Vendor

Best practice: Never pay a contractor before receiving a completed W-9.

Why? To file a 1099 you need:

Their legal name
Their business classification
Their Tax ID (SSN or EIN)
Their mailing address

If a vendor does not already have a copy of the a W-9 to send you, you can send them the official IRS form here: https://www.irs.gov/pub/irs-pdf/fw9.pdf

If a vendor refuses to provide a W-9, that is a major red flag.

It takes less than a minute to complete.

What If They Don’t Provide a W-9?

If a vendor you’ve already paid refuses:

You may still be required to issue a 1099
You may be required to begin backup withholding (24%)
Missing information does NOT remove your filing obligation

IRS backup withholding rules:
https://www.irs.gov/businesses/small-businesses-self-employed/backup-withholding

This is one of the most expensive 1099 mistakes we see.

Understand Who Typically Requires a 1099

Generally, 1099-NEC forms are issued for payments made to:

Independent contractors
Freelancers
Consultants
Service providers
Sole proprietors
Single-member LLCs (most cases)

Common examples:

Virtual assistants
Marketing agencies (if not taxed as S-Corp or C-Corp)
Designers and developers
IT support
Repair services
Bookkeepers

Corporations are usually exempt, but there are exceptions (like attorneys).

Always verify classification from the W-9.

You can find the IRS information on who requires a 1099-NEC or 1099-MISC here: https://www.irs.gov/instructions/i1099mec

Payment Platform Rules

If you pay vendors using:

PayPal
Venmo
Stripe
Square

Do NOT use “Friends & Family.”

Why?

Violates platform terms
Creates poor records
Complicates 1099 reporting
Can distort tax reporting

If vendors are paid via third-party processors, they usually receive a 1099-K from the payment processor.

You generally do not issue a 1099-NEC for payments made entirely through platforms that issue 1099-Ks, but review IRS guidance carefully.

Track 1099 Vendors in QuickBooks Online (QBO)

If you use QuickBooks Online, you must properly set up vendors to track 1099 eligibility.

How to Mark a Vendor as 1099 Eligible

Official QuickBooks instructions:
https://quickbooks.intuit.com/learn-support/en-us/help-article/payroll-setup/set-contractors-track-1099s-quickbooks/L4wX1Ge0e_US_en_US?uid=mll34as7

Basic Steps:

Go to My apps → Expenses & Bills → Vendors
Select the vendor
Click Edit
Under Additional info check off: Track payments for 1099
Save

You must also:

Enter their Tax ID in the Business ID No. / Social Security No. field
Ensure payments are categorized to a 1099-mapped expense account

Expense Accounts for 1099 Reporting

You will need to create expense accounts for both the 1099-NEC and 1099-MISC.

To create accounts:

Go to My Apps → Accounting → Chart of accounts
Click New account
Give the accounts recognizable names like 1099-NEC Contractor Payments

Official QBO article:
https://quickbooks.intuit.com/learn-support/en-us/help-article/form-1099-nec/modify-chart-accounts-1099-misc-1099-nec-filing/L3ljaesY7_US_en_US?uid=mll3hzqa

Common mistake:
Payments coded to “Other Expense” or incorrectly categorized accounts won’t show up.

1099 Reports in QuickBooks Online

Before filing 1099s, it’s a good idea to review a few reports in QuickBooks to double-check that everything is getting tracked correctly.

Vendor Contact List

Go to Reports → Standard Reports
Search for: Vendor Contact List
Click Customize
Under Columns, check off Track 1099

This will show you all the vendors you checked off the “Track payments for 1099” checkbox. Review this report to make sure the correct vendors are being tracked.

1099 Transaction Detail Report

Go to Reports → Standard Reports
Search for: 1099 Transaction Detail Report

This report shows all transactions that qualify for 1099 reporting, grouped by vendor. It will also show you what type of 1099 it’s associated with.

Review this report to make sure all payments are getting tracked for 1099s and that they’re associated with the correct 1099 form.

Official QBO help article:
https://quickbooks.intuit.com/learn-support/en-us/help-article/payroll/understand-contractors-need-1099s/L9Wqjtfif_US_en_US?uid=mll491k3

Filing Your 1099s

You have two main options:

Option 1: File Directly Through QuickBooks Online

QuickBooks allows e-filing for an additional fee.

Instructions:
https://quickbooks.intuit.com/learn-support/en-us/help-article/form-1099-nec/create-file-1099s-using-quickbooks-online/L2BapEpb1_US_en_US?uid=mll4ueg6

Pros:

Integrated
Simple interface
Auto-populates vendor data

Cons:

Per-form fees
Less flexibility
Not ideal for corrections

Option 2: Use a Dedicated 1099 Filing Service

You can also use a dedicated service such as:

Track1099 (what we use) – https://www.track1099.com
Watch Track1099’s QBO Integration video: https://www.youtube.com/watch?v=Jeb2fsKtWlM
Tax1099 – https://www.tax1099.com
Read Tax1099’s instructions for importing from QBO: https://guide.tax1099.com/importing_from_quickbooks_online.htm

Why we prefer this route:

Lower per-form cost at scale
Strong correction tools
Bulk upload options
Better support for amended filings
Built specifically for compliance

1099 Filing Deadlines

For 1099-NEC:

January 31 – Copy to the contractor must be mailed by this date
January 31 – File with the IRS either by E-filing or mail by this date

There are no automatic extensions for 1099-NEC.

For 1099-MISC

January 31 – Copy to the contractor must be mailed by this date
February 28th – Paper copy to IRS must be mailed by this date
March 31st – E-filing to the IRS, required if you are filing 10 or more returns.

If any of these dates fall on Saturday, Sunday, or a federal holiday, the date is the next business day.

IRS Penalties for Missing or Late 1099s

Under IRC Sections 6721 & 6722:

Filing Delay	Penalty Per Form / Maximum Penalty
Filed within 30 days	$60 / $239,000
After 30 days, before Aug 1	$130 / $683,000
After Aug 1 / Not filed	$340 / $1,366,000
Intentional disregard	$680 minimum / No max

Penalties can add up fast, even 5 missed forms can result in:

$300 – $3,400+ in penalties

Final Pre-Filing Checklist

Before you get ready to file double-check:

All vendors have W-9s on file
Tax IDs entered correctly
Payments categorized correctly
1099 reports reviewed
Credit card / 1099-K payments excluded
Amounts verified
Mailing addresses confirmed

Common Mistakes We See Every Year

Not collecting W-9s until January
Paying through payment process, like PayPal or Venmo, via Friends & Family
Coding contractor payments to the wrong account in QuickBooks
Assuming corporations never need 1099s
Ignoring 1099-K overlap
Filing late because the numbers weren’t reviewed in advance

Helpful IRS Resources

General 1099-NEC guidance:
https://www.irs.gov/forms-pubs/about-form-1099-nec

Instructions for 1099-NEC & 1099-MISC:
https://www.irs.gov/instructions/i1099mec

Backup withholding:
https://www.irs.gov/businesses/small-businesses-self-employed/backup-withholding

Feeling Overwhelmed?

If at any point this process feels overwhelming, we can step in.

Our 1099 Processing Add-On includes:

Up to 5 forms: $125/month
$25 per additional form
Notifying you of vendors we believe are reportable
Securely storing vendor W-9s in our client portal
Tracking annual payments for each vendor
Preparing and e-filing forms with the IRS (by the January 31st deadline)
Mailing or e-mailing contractor copies
Sharing copies of all filed 1099s through our secure portal

Just let us know before January, and we’ll take it from there.