What Are 1099s Anyway? And Why Do I Need to Send Them to My Vendors?
By Mary Cabodi, Client Accounting Manager
If you’ve ever wondered “What exactly is a 1099, and why do I need to send it to my vendors?” or “Who gets a 1099 and who doesn’t?”—you’re definitely not alone.
Think of it this way:
A W-9 for a vendor is like a W-4 for an employee.
A 1099 for a vendor is like a W-2 for an employee.
They serve similar purposes, just in the world of independent contractors and service providers rather than employees.
Step 1: Collect a W-9 From Every Vendor
A W-9 provides the key information needed to prepare a 1099:
- Legal Name
- Address
- Tax ID Number
- Entity type (corporation, partnership, sole proprietor, etc.)
Best practice: Do not pay a vendor until they provide a W-9. This not only motivates them to provide it promptly, but it also saves you from scrambling for paperwork in January as 1099 deadlines approach.
Why this matters:
If a contractor refuses to provide a W-9, the IRS requires you to withhold 24% backup withholding from their payments. And if the W-9 or 1099 requirements are not handled properly, the IRS can assess that backup withholding against you—and may even challenge or temporarily deny your deduction for those contractor payments until the issue is corrected.
Collecting W-9s upfront prevents all of these problems.
Step 2: Determine Who Needs a 1099
While the IRS rules have many nuances (you can reference the official instructions for more detail), here are the key guidelines most businesses rely on:
Send a 1099 to vendors you paid $600 or more during the year.
Corporations are generally exempt, except attorneys—they always receive a 1099.
1099s apply to services, not merchandise purchases.
Credit card payments are excluded, since the card processor reports those to the IRS.Rent payments require a 1099 if paid directly to the property owner. If you pay a property manager or real estate agent, they are responsible for issuing the 1099 to the property owner.
Store all W-9s in a safe, accessible place to be prepared in case of an audit.
This isn’t an exhaustive list, but it covers the most common scenarios our clients face.
Important Deadlines
- Most 1099 forms: February 2, 2026
- 1099-MISC (electronic filing): March 31, 2026
Need Help? Keystone is Here for You.
If you’re unsure about a specific vendor or situation, the Keystone CPAs team is happy to help you navigate your 1099 requirements. Starting early keeps the process smooth, stress-free, and compliant.