The January 31 Deadline That Can Cost You a Deduction: What to Know About 1099-NEC & 1099-MISC
By Mike Bosma
January may feel early in the tax year, but one of the most important compliance deadlines arrives fast—and it’s one the IRS pays close attention to.
Forms 1099-NEC and 1099-MISC are due January 31, 2026, and mistakes here can create more than just filing penalties. In certain situations, they can put otherwise valid deductions at risk.
If you paid vendors, contractors, or service providers in 2025, now is the time to make sure your reporting is correct.
What’s the Difference Between 1099-NEC and 1099-MISC?
- Form 1099-NEC is used to report nonemployee compensation—generally payments of $600 or more to independent contractors, freelancers, consultants, and other service providers.
- Form 1099-MISC is used for other types of payments, such as rents, prizes and awards, royalties, and certain legal settlements.
While the forms serve different purposes, they share one critical feature: they create an IRS information trail that ties your deduction to the recipient’s income.
Common 1099 Filing Mistakes We See Every Year
Even well-run businesses make these errors—often unknowingly:
1. Missing Contractors Entirely
Failing to issue a 1099 because:
- The contractor is “just a side vendor”
- Payment was split across multiple invoices
- Payments were made electronically (Venmo, Zelle, ACH, etc.)
Reality: Payment method does not eliminate the 1099 obligation.
2. Using the Wrong Form
- Filing 1099-MISC instead of 1099-NEC (or vice versa)
- Reporting services on 1099-MISC when they belong on 1099-NEC
This is one of the fastest ways to trigger IRS correspondence.
3. Incorrect or Missing Taxpayer Information
- No W-9 on file
- Incorrect EIN or SSN
- Business name doesn’t match IRS records
These errors often lead to B-Notices, backup withholding exposure, and delayed resolution.
4. Assuming “They’ll Report It Anyway”
Some business owners assume: “The contractor will report the income, so I don’t need to file.”
The IRS does not agree.
Critical Tax Risk: Deductions Can Be Disallowed Without a Required 1099
This is the part many taxpayers don’t realize. If a business is required to issue a 1099 and fails to do so, the IRS has authority to:
- Disallow the related deduction, and
- Assess penalties and interest—even if the expense was legitimate
This risk most often arises during:
- IRS audits
- Payroll vs. contractor classification reviews
- Examinations focused on cost of goods sold or operating expenses
In short: A missing 1099 can turn a valid business expense into a taxable adjustment.
Why January 31 Matters
For 1099-NEC, January 31 is the deadline to:
- Furnish the form to the recipient and
- File it with the IRS
Missing the deadline can result in:
- Per-form penalties
- Increased audit exposure
- Complications in substantiating deductions later
What You Should Do Now
- Review 2025 vendor payments
- Confirm W-9s are on file and accurate
- Verify which payments require 1099-NEC vs. 1099-MISC
File by January 31, 2026