1099 Filing Season Has Started: Key Deadlines and Reminders

Welcome to the first briefing of 2026. If you are a founder or finance leader in the $1M to $50M revenue bracket, January is rarely about New Year’s resolutions. It is about the heavy operational lift of year-end closing and the high-stakes compliance window known as 1099 season. This month, we are moving past the administrative headache to look at 1099s as a strategic data exercise.

 

Properly preparing and filing your 1099 forms is not just about avoiding IRS penalties. It is about the integrity of your financial records and your readiness for future audits or M&A due diligence. In this edition, we provide the data-backed roadmap to navigate the 2026 filing season with the precision of a seasoned CFO. 

 

The shift toward independent talent is no longer a temporary trend; it is a structural change in the global workforce. According to the McKinsey Global Institute’s 2025 American Opportunity Survey, approximately 38% of the U.S. workforce now identifies as independent workers, a figure that has grown steadily since 2022. For mid-market companies in the $1M-$50M range, this reliance on contractors allows for agility, but it also creates a massive volume of information reporting requirements that many internal accounting teams are unprepared to handle.

 

Simultaneously, the cost of non-compliance is rising. The Internal Revenue Service (IRS) adjusted its penalty rates for inflation for the 2025 tax year, and these carry into the 2026 filing season. According to the IRS General Instructions for Certain Information Returns (2025/2026), penalties for late or incorrect filings can range from $60 to $330 per form, depending on how late the filing is. For a company managing 50 or 100 contractors, these "minor" administrative errors can quickly snowball into five-figure liabilities that directly erode your EBITDA.

 

 

Think of your 1099 season as the "stress test" for your accounts payable department. If your records are messy in January, it usually points to systemic failures in how you onboarded vendors in July. 

 

For companies scaling toward $50M, the complexity lies in the distinction between different forms, primarily the 1099-NEC (Non-Employee Compensation) and the 1099-MISC.

 

The 1099-NEC is your primary focus if you paid an individual, partnership, or certain LLCs $600 or more for services rendered. The deadline is rigid: January 31st. Why does this matter so much? Because the IRS uses automated data-matching systems that are more sophisticated in 2026 than ever before. When your 1099-NEC doesn't match the contractor’s personal tax return, it triggers a red flag—not just for them, but for you. It suggests that your internal controls for tracking disbursements are potentially flawed.

 

One of the most frequent mistakes we see at CFOPro is the "LLC Trap." Many business owners assume that if a vendor is an LLC, they don't need a 1099. That is a dangerous oversimplification. Unless that LLC is taxed as a C-Corporation or an S-Corporation, you are likely still required to file. The only way to know for sure is to have a signed Form W-9 on file before you ever cut the first check. Treating the W-9 as an optional "nice-to-have" is like starting a construction project without a signed contract; you are exposed to liability from day one.

 

Beyond the tax forms, there is a deeper strategic issue at play: worker misclassification. The U.S. Department of Labor (DOL) issued revised guidance in late 2024 regarding the "Economic Reality Test" for determining whether a worker is an employee or an independent contractor. If you are issuing 1099s to individuals who perform core business functions, work fixed hours, and use company equipment, a 1099 won't protect you. In fact, it provides the government with a roadmap to audit your payroll practices.

 

In a tough economic environment where capital is expensive, an unexpected audit triggered by poor 1099 practices is a "black swan" event you can avoid. A seasoned CFO doesn't just look at 1099s as a tax requirement; they look at them as a risk management tool. By reviewing your 1099 list, you are essentially reviewing your external spend. It is a perfect opportunity to ask: "Are we over-reliant on high-cost contractors where a full-time hire would be more accretive to our margins?"

 

Finally, consider the digital shift. As of 2024, the IRS lowered the threshold for mandatory electronic filing to just 10 forms in total across all information returns. In 2026, if you are a business with more than 10 vendors or employees, paper filing is no longer an option. This requires a robust tech stack—something we help our clients implement to ensure that data flows seamlessly from the general ledger to the tax filing software without manual entry errors.