Forms 1099-NEC for 2026 payments are due to contractors and to the IRS by February 1, 2027, because January 31 falls on a Sunday. There is no automatic extension for the 1099-NEC, and the penalties apply per form, once for the copy the IRS did not get and again for the copy the contractor did not get. Most of the errors that trigger them are not filing errors at all. They are bookkeeping gaps from earlier in the year that only surface when the forms are being prepared.
Here are the mistakes we see most often, what each one costs, and the routine in December that prevents them.
Mistakes in who gets a form
1. No W-9 on file. Collect the form before the first payment, when you still have leverage. Without it you may not have the contractor's correct legal name, tax ID, and entity type, and a contractor who will not provide a taxpayer identification number is subject to 24 percent backup withholding on every payment. Chasing a W-9 in January from someone you paid in March is the single most common reason forms go out late or wrong.
2. Sending forms to corporations. Payments to C corporations and S corporations are generally exempt from 1099-NEC reporting, and the W-9 is how you know. An LLC is not automatically exempt: a single-member LLC or an LLC taxed as a partnership gets a form, while an LLC that has elected corporate tax treatment does not. The exceptions run the other way too. Payments for legal services are reportable regardless of the law firm's entity type, and medical and health care payments to corporations are reportable on the 1099-MISC.
3. Reporting card and app payments. If you paid a contractor by credit card, debit card, or a third-party payment network such as PayPal Goods and Services or a Venmo business profile, the payment processor reports it on a Form 1099-K. Do not include those payments on your 1099-NEC, or the contractor's income is reported twice. Payments by check, ACH, wire, cash, and bank-to-bank services such as Zelle are yours to report.
4. Using last year's threshold. For payments made in 2026, the 1099-NEC threshold is $2,000 per contractor for the year, up from the $600 that applied for decades, and it is indexed to inflation after this year. Check the current threshold each January rather than carrying an old rule forward. Personal payments are never reportable; the form covers only payments made in the course of your trade or business.
Mistakes on the form itself
5. Wrong form. Nonemployee compensation, which is pay for services to anyone who is not an employee, goes on the 1099-NEC. Rent paid to a landlord who is not a corporation, prizes, and gross proceeds paid to an attorney in a settlement go on the 1099-MISC, which has a later IRS deadline. Putting rent on a 1099-NEC tells the IRS your landlord owes self-employment tax on it.
6. Name and TIN mismatches. A contractor who does business under a brand name but files taxes under their own name needs the legal name in the name box, exactly as it appears on the W-9. A mismatch produces an IRS notice months later, and if it is not corrected you are required to begin backup withholding. The IRS offers free TIN matching through its e-services and its IRIS filing portal; use it before filing, not after the notice arrives.
7. Wrong amount. The amount is what you paid during the calendar year, not what you were invoiced. A December invoice paid in January belongs on next year's form. Include reimbursed expenses in the total unless the contractor substantiated them to you the way an employee would under an accountable plan, in which case they can be left out.
Mistakes in how and when you file
8. Filing on paper when e-filing is required. Any business filing ten or more information returns in total for the year, counting all W-2s and every type of 1099 together, must file them electronically. A business with six W-2s and four 1099-NECs is over the line. The IRS's free IRIS portal handles small volumes, and most payroll and accounting software files for a per-form fee. Paper forms filed when e-filing was required can be penalized as if they were never filed.
9. Missing the deadline or the recipient copy. The penalty is charged per form and rises the later you file: it starts around $60 per form for forms filed within 30 days of the deadline and climbs past $300 per form once you are beyond August 1, with a much larger penalty for intentionally not filing. The same schedule applies separately to the copy you failed to give the contractor, so one late 1099-NEC is penalized twice. The 1099-NEC has no automatic extension; Form 8809 grants one only for hardship.
10. Ignoring the state. Some states accept the federal filing through the combined federal and state filing program, some require a direct filing, and some require nothing. Check the rule for your state and for any state where a contractor lives, because the state's filing can carry its own deadline and penalty.
The December routine that prevents all of this
Run a report of every vendor paid $2,000 or more this year, excluding payments made by card or payment app. For each one, confirm there is a W-9 on file, note the entity type on it, and check that the vendor is flagged as a 1099 contractor in your accounting software with the payments posted to a contract labor or professional fees account rather than scattered across expense categories. Send W-9 requests now to anyone missing one, while the final payments of the year are still in your hands. Confirm mailing addresses, and ask contractors to consent to electronic delivery, which the rules require before you can email a form instead of mailing it.
If the books are current and vendors were tagged as they were paid, the forms take an hour in January. If payments to the same contractor are split across three expense accounts, two of them paid personally and reimbursed, the forms take a day and some of them will be wrong.
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