Collect the W-9s in October, not January

Why this lands on your desk now

Every January, in a lot of small businesses, the same thing happens. Someone exports a year of payments, sorts by vendor, highlights everyone over $600, and starts emailing contractors for the tax forms they should have sent in March. Half reply. A few have moved. One has a new business name. The forms have to go out by the end of the month.

This year there's a second reason to look at it early. For payments made in 2026, the IRS raised the threshold for reporting nonemployee compensation on Form 1099-NEC from $600 to $2,000. The IRS instructions say the amount may be adjusted for inflation starting in 2027. So the formula in last year's spreadsheet, or the setting in your accounting tool, is now wrong, and it will keep changing.

None of this is tax advice. Your accountant decides what you file. What follows is how to make sure they get clean data in January instead of a scramble.

The message

Send something like this to whoever runs your bills and vendor payments: a bookkeeper, an in-house developer, or the person who set up your accounting and payment tools.

Hi [name], before year-end I'd like to tidy up how we handle contractor tax forms. Can you look at these and tell me what's easy and what isn't? >1. Collect W-9s at setup. No new vendor gets paid until we have a W-9 on file. Add it to the vendor setup form or request flow, so it's asked for automatically.2. Chase the gaps now. List every vendor we've paid in 2026 who has no W-9 on file, with their total so far, and send a request this month.3. Make the threshold a setting. Our 1099 report should use the threshold for the tax year (it's $2,000 for 2026 payments) from one setting we can update, not a number typed into a formula.4. Split by payment method. Show each vendor's total by how we paid them: bank transfer, check, card, payment app. [Ask our accountant which ones count.]5. Flag entity type. Record whether each vendor is a corporation, and flag lawyers separately.6. Run a preview on December 1. A draft list of who looks reportable, so January is a check, not a hunt. >What would this take with our current setup?

What the message is really asking for

Paperwork at the start, not the end. A W-9 is easy to get when a vendor wants to be paid and hard to get a year later. Moving the request to setup turns a January chase into a step nobody notices.

Rules that live in one place. The threshold is a setting, not a number someone remembers. It changed this year and may move again, so it belongs somewhere you can update once.

Totals that mean something. The IRS instructions say payments made by credit card, payment card and certain other methods, including third-party payment networks, are reported by the payment processor on Form 1099-K, not by you on a 1099-NEC. If your report lumps every payment together, someone paid by card might get a form they shouldn't. That's why the payment-method split matters.

Known exceptions, marked. The instructions say payments to corporations generally aren't reported, but payments for legal services are an exception. Marking entity type at setup saves a judgment call later.

The questions you'll get back

"What about vendors we paid both ways?" Common. The split by payment method handles it: only the right part counts. Let your accountant confirm.

"Do we need to e-file?" The IRS requires electronic filing once you file 10 or more information returns in total for the year, counting all types together. Many small businesses cross that without noticing.

"When is it due?" Form 1099-NEC is due to the IRS by January 31, and payee copies go out by then too. When that date falls on a weekend or holiday, the due date is the next business day. January 31, 2027 is a Sunday.

"What if someone won't send a W-9?" Ask your accountant about backup withholding. The IRS says that if you withhold under those rules, you file a 1099-NEC regardless of the amount.

"Does this change last year's forms?" No. The IRS says payments made before 2026 use the $600 threshold, so anything you file late or correct for 2025 stays on the old rule.

"Can't the accounting software do this?" Often, yes. Most of this message is about switching on what you already have and checking it's set up the way your accountant expects.

What not to automate

Don't let a tool decide on its own whether someone is a contractor or an employee. That's a judgment with legal weight, and it belongs with a person and your accountant.

Don't auto-send forms without a review. A December preview, read by someone who knows the vendors, catches the name changes, the duplicates and the vendor who was paid by two different departments under two spellings.

Do protect the forms themselves. A W-9 carries a taxpayer ID, which for a sole contractor is often their Social Security number. Collecting them by email attachment means copies end up in inboxes, downloads folders and shared drives for years. A setup form that stores the document in one place, with access limited to the people who prepare the filings, is safer, and it's the same step you're automating anyway. Ask where last year's W-9s live today; the answer is usually several places.

And don't throw away the old setting. Keep the threshold for each year alongside the year, so a correction to a 2025 form uses 2025's rule.

Put this into practice

This week, run one report: every vendor paid in 2026, their total, how you paid them, and whether you have a W-9. Sort by total. The vendors over $2,000 with no W-9 are this month's emails. The ones paid only by card are a question for your accountant.

We build business automation that moves the paperwork to the step where it's easy, and keeps rules like this in one place. If your January is a week of chasing, talk to us. If you're also matching payouts to bank deposits, see why the deposit doesn't match the sales report.

Related work: Sutton|Place.