Year-End Series, Part 1: Running Your 1099 Vendor Audit Now
By: Ironclad Accounting + Finance | Featured | November 5, 2026Every January, business owners find themselves chasing down W-9s, sorting through contractor payments, and trying to meet 1099 filing deadlines. Most of that stress can be avoided by getting organized before the year ends.
And this year, there’s an added reason to start early: the rules changed.
What’s Different This Year
The One Big Beautiful Bill Act raised the reporting threshold for Form 1099-NEC and certain payments reported on Form 1099-MISC from $600 to $2,000 for payments made after December 31, 2025. Starting in 2027, the threshold will be adjusted for inflation.
A higher threshold means fewer forms, but there are two things to watch.
The date you paid is what counts. The reporting year generally follows when payment was made, not when the vendor invoiced you. A December 2025 invoice paid in January 2026 generally counts toward this year’s total.
You still need to collect vendor tax information. You may not know early in the year which contractors will exceed $2,000 by December, so collecting a W-9 before paying potentially reportable vendors is still the safest practice.
The deadline also shifts this cycle. Forms 1099-NEC are normally due to recipients and the IRS by January 31. In 2027, that date falls on a Sunday, so the deadline moves to Monday, February 1.
How to Run the Audit
- Pull a complete vendor payment report for the year to date. Include every payee, not only those you think of as contractors.
- Confirm W-9s are on file. Missing tax information can create delays. Request W-9s from potentially reportable vendors now, while they’re still responsive. If a payee doesn’t provide a required taxpayer identification number, backup withholding rules may apply.
- Classify each vendor. Payments to corporations are generally exempt from 1099-NEC reporting, with exceptions, including certain payments to attorneys. An LLC can be taxed as a sole proprietorship, partnership, or corporation, and its W-9 helps establish the proper classification.
- Separate payments by method. Payments made by credit card or through qualifying third-party payment networks are generally handled under Form 1099-K reporting rules rather than Form 1099-NEC. Review how payments were processed to avoid duplicate reporting.
- Project year-end totals. Flag vendors approaching $2,000 who may receive additional payments before December 31.
- Verify names and taxpayer identification numbers. A mismatch can trigger IRS notices. Businesses filing 10 or more information returns in total, including W-2s, are generally required to file electronically, so confirm your filing process, too.
A Chance to Look a Little Deeper
A vendor audit is also a good time to review how your workers are classified. If a contractor works set hours, uses your equipment, and works exclusively for you, the relationship may deserve a closer look. These factors don’t automatically make someone an employee, but they can raise questions about worker classification.
Misclassification can create payroll tax exposure and become an issue during a buyer’s due diligence review.
Clean vendor records make January easier. They also demonstrate that your business runs on accurate information, which can strengthen its value.
If you’d like help reviewing your vendor list or preparing for filing season, schedule a consultation today.
