If you paid any unincorporated vendor $600 or more for services this year, you likely owe them a Form 1099-NEC by January 31. And the painful part was never the form, it's reconstructing a year of “who did we pay, how much, and where's their W-9?” in mid-January. This guide covers the rules in plain English, then the system that makes them trivial: tag vendors as money goes out, collect the W-9 before the first payment, and let the year-end report assemble itself.
Educational overview, not tax advice. Thresholds and forms change, and your CPA has the final word on filing. What this article fixes is the part your CPA can't: having clean vendor totals ready to hand them.
The rules, minus the IRS prose
- Who gets a 1099-NEC: unincorporated vendors (sole proprietors, most LLCs, partnerships) you paid $600+ during the year for services: contractors, designers, your bookkeeper, the landscaper at your office. Also attorneys, even if incorporated.
- Who doesn't: corporations (S or C) for most payments, product purchases, and (the big modern exception) vendors you paid by credit card or payment platforms (those flow through the processor's 1099-K instead, so you don't double-report them).
- The W-9 is the form the vendor fills out giving you their legal name, entity type, and tax ID, which is everything you need to file. The whole game is having it before January.
- Deadline: January 31, both to the vendor and the IRS. It arrives three weeks after the holidays, which is why the panic is traditional.
Why January goes wrong (the three classic failures)
- Vendor totals don't exist. Payments are scattered across categories (the same contractor sits in “repairs,” “contract labor,” and “miscellaneous”), so someone greps a year of transactions by memory.
- The W-9 chase. The vendor who happily invoiced you in March has strong opinions about paperwork in January, or has vanished entirely.
- The payment-method blur. Nobody remembers which payments were check/ACH (1099 territory) versus card (excluded), so totals are wrong in both directions.
The system: track the who, all year
Categories track what money was for; 1099s need who it went to. The fix is tagging: every outgoing payment carries a vendor tag, independent of its category, and totals roll up per vendor continuously. Three habits make it automatic:
1. W-9 before the first dollar
Make it policy: no vendor gets paid until their W-9 is in. It takes them two minutes when they want your business and weeks when you want their paperwork. File it against the vendor record the day it arrives. LedgerMCP stores one W-9 attachment per vendor tag for exactly this.
2. Tag as you categorize (or let the AI do both)
Tagging is a one-touch habit when it happens during the normal flow, and zero-touch when an agent does the categorizing anyway: “as you categorize, tag every vendor payment with the vendor's name.” Your assistant applies tags with the same pass that posts entries, so the rollup is always current. (New to the agent workflow? Start with the AI bookkeeping guide.)
3. Check the rollup quarterly, not annually
Once a quarter, one question: “which vendors are over $400 so far, and which are missing a W-9?” That catches the threshold-approachers while they still answer your emails. It slots neatly into step 8 of the month-end close.
What January looks like with the system on
You run one report. LedgerMCP's year-end 1099 report shows total paid per vendor, flags everyone at or over the $600 threshold, and flags anyone missing a W-9, all assembled from the tags that accumulated all year. Hand it to your CPA (or your e-filing service) and you're done before the coffee cools:
"Run the 2026 1099 report." → 7 vendors ≥ $600 · 6 with W-9 on file → Flagged: Riverside Design LLC ($2,340 paid, no W-9) → Excluded automatically: card-paid vendors (1099-K territory)
That one flagged vendor in December is an email; in January it's a saga. That's the entire value of the system.
Behind on the whole year?
If it's already late and none of this exists, don't grep by hand. Run the catch-up workflow and include vendor tagging in the instructions: “as you categorize the backlog, tag vendor payments; then run the 1099 report and list missing W-9s.” An afternoon of agent work reconstructs the vendor totals that January-you was going to assemble from bank statements and regret.
Quick answers
Do I send a 1099 for products I bought?
No. 1099-NEC covers services, so the office chairs are safe.
I paid a contractor $2,000, all by card. 1099?
No. Card and platform payments are the processor's 1099-K job. This is why tracking payment method matters and why your books should record it.
The vendor won't return a W-9. Now what?
Document your requests, talk to your CPA about backup-withholding rules for future payments, and adopt the W-9-before-first-dollar policy so this is the last time.
Penalties for missing the deadline?
They exist, per form, scaling with lateness; current numbers are on irs.gov. The system above costs less than one late form.