Paying 1099 Contractors: What to Track All Year

If you pay US contractors $600 or more in a year, you generally owe them (and the IRS) a 1099-NEC in January. The form itself takes minutes. The pain is reconstructing who you paid and how much, unless you tracked it as you went.

Track from the first payment

• A vendor record per contractor: every payment attributed to them, so the annual total is a lookup, not a spreadsheet hunt.
• A W-9 before the first payment: you need their legal name, address, and TIN in January, and asking in January is how ghosting happens.
• Payment method notes: payments made through card processors and platforms like PayPal (goods & services) are typically reported by the processor on 1099-K, not by you. Direct checks, transfers, and cash are on you.
• Attachments: invoices from the contractor attached to the payments that settled them.

The thresholds and dates that matter

The $600 threshold is per contractor, per year, for services (not goods). Corporations are generally exempt, another reason the W-9, which declares entity type, matters. The 1099-NEC deadline is January 31, both to the contractor and the IRS, and penalties scale with lateness.

A system, not a scramble

In practice: create the vendor when you engage them, categorize every payment to a Contractors category attributed to that vendor, and store the W-9 with your records. In January, a vendor report, total paid per contractor, is your 1099 worksheet. A vendor statement PDF doubles as the backup if anyone disputes a number.

As always with tax mechanics: education, not advice. Confirm your specifics with a professional, especially around processor-reported payments.