The Complete Guide to Filing 1099s in 2025

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As we step into 2025, business owners must prepare for one of their critical annual responsibilities: filing 1099 forms. Whether you’re a seasoned entrepreneur or a new business owner, understanding how to handle 1099s can save time, reduce errors, and help you avoid penalties.

This blog walks you through everything you need to know for 2025, including key updates and actionable steps. Below is a quick summary of what you’ll find:

What is a 1099 Form?

A 1099 is a tax form that businesses use to report certain types of payments to the IRS. Unlike employee wages, which are reported on W-2 forms, 1099 forms are used for non-employee income.

The most common 1099 forms include:

  • 1099-NEC (Nonemployee Compensation): For payments of $600 or more to independent contractors.
  • 1099-MISC (Miscellaneous Income): For other payments, such as rent, royalties, and awards.
  • 1099-K (Payment Card and Third-Party Network Transactions): For payments processed through services like PayPal or credit cards (usually over $600 starting 2024).

Key Changes to 1099 Filing in 2025

Several changes have been introduced in recent years that affect how businesses file 1099s:

  • Mandatory E-Filing Threshold: As of 2024, businesses filing 10 or more 1099 forms must e-file. This lowers the previous threshold of 250 forms, making it likely that more businesses will need to use e-filing in 2025.
  • Deadline for 1099-NEC: The deadline to send 1099-NEC forms to recipients and the IRS remains January 31, 2025. This is earlier than the deadline for other 1099 forms filed on paper.
  • 1099-K Lower Reporting Threshold: For payments processed by third parties, the 1099-K reporting threshold remains at $600, which could lead to more forms being issued to contractors and businesses in 2025.

Who Needs a 1099?

You must issue a 1099 form to anyone you paid over $600 in 2024 for:

  • Services performed by independent contractors, freelancers, or consultants.
  • Rent payments to landlords (for commercial property).
  • Attorney fees, even if the total is less than $600.

Exceptions to 1099 Requirements:

  • Payments to corporations except for the following:
    • Fish purchases for cash reported in 1099 MISC box 11. 
    • Attorneys’ fees reported in 1099 NEC box 1. 
    • Medical and health care payments reported in 1099 MISC box 6 
    • Gross proceeds paid to an attorney reported in 1099 MISC box 10. 
    • Substitute payments in lieu of dividends or tax-exempt interest reported in 1099 MISC box 8. 
  • Payments made via credit card, PayPal, or other third-party platforms (reported on Form 1099-K by the payment processor).

Steps to File Your 1099s in 2025

Filing 1099s involves several steps, but staying organized makes the process much easier. Here’s what you need to do:

Step 1: Collect Information Early

Request a completed W-9 Form from every contractor or vendor before making payments. This form contains essential information like:

  • Their legal name.
  • Taxpayer Identification Number (TIN).
  • Business type (sole proprietor, LLC, corporation, etc.).
Step 2: Track Payments

Throughout the year, use accounting software like QuickBooks to track payments to contractors and flag those requiring a 1099. Accurate bookkeeping ensures you don’t miss anyone.Make sure that banks and cash in safe are completely reconciled with the accounting software.

Step 3: Verify TINs

Use the IRS TIN Matching Tool to confirm the accuracy of Taxpayer Identification Numbers. This reduces the risk of errors when filing.

Step 4: Choose a Filing Method

You can file your 1099s in one of two ways:

  • E-Filing: Recommended for faster processing and required if filing 10 or more forms.
  • Paper Filing: Still an option for smaller businesses, but must use IRS-approved red forms and include Form 1096 as a summary.
Step 5: File by the Deadlines
  • Recipient Copies: Must be sent by January 31, 2025.
  • Paper Filing with IRS: Due by February 28, 2025.
  • E-Filing with IRS: Due by March 31, 2025.
Step 6: Retain Records

Keep copies of all 1099 forms and related records for at least three years in case of an audit.

Best Software for Filing 1099s

To make the filing process more manageable, several software options are available to streamline your 1099 reporting:

  • QuickBooks: Ideal for small businesses, QuickBooks automates 1099 preparation and filing, ensuring accuracy while integrating with your financial data.
  • Gusto: Gusto handles payroll and contractor payments, making it easy to generate and file 1099s.
  • Track1099: A cloud-based software that streamlines the process of creating, distributing, and e-filing 1099 forms with the IRS and recipients.
  • Tax1099: A cloud-based tool designed for 1099 e-filing, compatible with various accounting systems like QuickBooks and Xero.
  • Efilemyforms: An online platform designed to simplify the preparation, filing, and distribution of tax forms like 1099s, W-2s, and ACA forms, offering a fast and user-friendly solution for businesses and accountants.

Avoid Common Mistakes

Avoiding errors is just as important as meeting deadlines. Here are the most common mistakes and how to avoid them:

  • Missing Deadlines: File on time to avoid penalties, which can range from $50 to $550
  • Incorrect TINs or Names: Double-check W-9 forms and use the TIN Matching Tool to ensure accuracy.
  • Misclassification: Make sure you classify workers correctly as independent contractors, not employees, to avoid potential IRS penalties.
  • Duplicate Reporting: Payments processed through credit cards or PayPal do not require a 1099-NEC, as they are reported by the processor.

Simplify 1099 Filing with MontPac

Navigating 1099 filing requirements can be daunting, especially with changing regulations and tight deadlines. MontPac offers expert assistance to help businesses streamline this process:

  • W-9 Collection and Verification: We handle contractor documentation so you don’t have to.
  • Accurate Preparation and Filing: Whether you file electronically or by paper, we ensure compliance with IRS guidelines.
  • Year-Round Bookkeeping Support: Stay organized and ready for tax season with MontPac’s accounting services.

With MontPac, you can focus on growing your business while we take care of your 1099 filing needs.

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