1099 Hangover: What To Do If You Missed A Contractor Or W-9

It's February 1st. You just realized you forgot to file a 1099 for that contractor who built your website in March. Or maybe you sent forms to most of your contractors, but you're still missing a W-9 from that freelance designer who did $8,000 worth of work last year.

Welcome to the 1099 Hangover.

The good news? This is fixable. The bad news? The IRS doesn't give participation trophies for being "mostly compliant," and waiting around hoping nobody notices is a terrible strategy.

Let's talk about what happens when you miss the January 31st deadline, what you need to do right now, and how to set up a system so you never have to stress about this again.

First: Don't Panic (But Don't Wait Either)

Missing the 1099 deadline isn't the end of the world, but it does start a clock. The IRS assesses penalties based on how late you are, and those penalties escalate the longer you wait.

2026 Penalty Structure (per form):

• Within 30 days of deadline: $60
• 31 days to August 1: $130
• After August 1 (or never filed): $340
• Intentional disregard: $680 (with no cap)

So if you're reading this on February 3rd and you owe three 1099s, you're looking at a potential $180 penalty if you file this week. If you wait until March, that jumps to $390. And if you wait until September? You're at $1,020.

The lesson? File immediately. Every day you wait costs you money.

What To Do Right Now: The 4-Step Recovery Plan

Step 1: Make a List of Every Contractor You Paid $600+ Last Year

Go through your bank statements, credit card transactions, and accounting software. Look for:

• Freelancers and independent contractors
• Consultants
• Vendors who provided services (not goods)
• Anyone you paid via check, ACH, or wire transfer

If you paid them $600 or more during the 2025 calendar year and they're not a corporation, they need a 1099-NEC.

Exception: You typically don't need to issue 1099s to S-Corps or C-Corps. If you're not sure, check their W-9. It’ll tell you.

Step 2: Track Down Missing W-9s

This is the part that stresses everyone out. You need a W-9 from every contractor before you can file their 1099. If you don't have one on file, you need to get one now.

Send this polite but urgent email:

Subject: Urgent: W-9 needed for 2025 Tax Filings

"Hi [Name], we're finalizing our 1099 filings and realized we don't have a completed W-9 on file for you. Could you send one over by end of day?

Here's a link to the form: IRS W-9 PDF. Thanks!"

Most contractors will turn it around in a few hours because they want their 1099 too. If someone ghosts you, send a follow-up and document that you tried. The IRS wants to see that you made a good-faith effort.

If a contractor flat-out refuses or disappears, you still need to file the 1099. Use whatever information you have (name, address, payment amount) and leave the TIN field blank. The IRS will follow up with them directly, but you've done your part.

Step 3: File the Forms (Paper or Electronic)

Once you have the data, you have two main paths to get those forms to the IRS:

• Paper filing: You can order 1099-NEC forms from an office supply store or the IRS website, fill them out by hand, and mail Copy A to the IRS with Form 1096 (the transmittal summary).
• Electronic filing: This is faster and much less error-prone. You can use the IRS FIRE system (free but clunky) or a third-party service like TaxBandits or Track1099. Most modern accounting software also supports direct e-filing.

Either way, make sure you're distributing the copies correctly:

• ✅ Copy A: To the IRS
• ✅ Copy B: To the contractor
• ✅ Copy C: For your internal records

Step 4: Pay the Penalty (Yes, Really)

The IRS will likely send you a notice assessing the late-filing penalty. When that arrives, pay it promptly. Interest accrues on unpaid penalties, and ignoring an IRS notice is a fast way to turn a $60 problem into a $600 headache.

Pro Tip: If you have a legitimate reason for the delay (like a natural disaster or serious illness), you can request "penalty abatement" by writing a letter explaining the cause. It’s not guaranteed, but the IRS does grant them occasionally for first-time offenders.

The W-9 Problem: Why It Happens and How to Fix It

Here's why so many businesses end up scrambling in January: they wait until tax season to ask for paperwork.

When you hire a contractor in April, getting a W-9 is easy. They’re excited about the new project and highly responsive. But when you email that same contractor on January 28th asking for a form from nine months ago? It’s awkward, they’re busy, and you’re stressed.

The Fix: The "No W-9, No Pay" Rule

Build W-9 collection into your onboarding process. Before you ever hit "send" on that first payment, ensure you have their info. Most organized businesses follow this simple 3-step system:

1. Send a welcome email with a link to a digital W-9.
2. Store the completed form in a dedicated "2026 W-9s" folder immediately.
3. Hold the first payment until that form is in your hands.

This one habit eliminates 90% of the January panic.

What About Corrections?

Let's say you already filed a 1099, but you made a mistake. Maybe you transposed a digit in the contractor's TIN, or you reported the wrong amount, or you forgot to include a contractor entirely and had to file a late form.

You'll need to file a corrected 1099 (not a 1099-C, despite what the section header says: that's a different form for debt forgiveness).

To correct a 1099-NEC:

• Check the "CORRECTED" box at the top of the form.
• Enter the correct information.
• File it with the IRS and send the updated copy to your contractor.

The IRS will match the corrected form to the original and update their records. You might still owe a penalty for the original error, but filing the correction promptly shows good faith.

The "Never Again" System: Automate W-9s and Track Contractors Year-Round

If you're tired of the 1099 scramble, it's time to set up a system that runs in the background all year long. Here’s the High Point recommendation for keeping your sanity intact:

1. Automate W-9 Collection: Use a tool like HelloSign, DocuSign, or even a simple digital form to collect W-9s automatically when you onboard. Store them in a folder labeled "2026 W-9s" so they are ready the second you need them.
2. Track Contractor Payments Monthly: Don't wait until December. Run a quick report every month showing year-to-date payments to all vendors. If someone is creeping toward that $600 mark, you should already have their paperwork.
3. Set a December 15th Reminder: Two weeks before year-end, do a final sweep. If a contractor is at $550 and you have another project planned, get that W-9 before the holiday break.
4. Outsource the Heavy Lifting: If you manage dozens of contractors, hire a pro. For a small fee per form, a bookkeeper can handle the entire filing process, eliminating the risk of late fees or incorrect data.

This is what we call the "Human Layer." While automation is fantastic for tracking thresholds and storing PDFs, you still need a real person to review the list and ensure nothing (and nobody) has slipped through the cracks.

The Real Cost of Skipping 1099s

The penalty for late filing is annoying, but it isn't the scariest part of a missing 1099. There are much bigger financial risks at play:

1. You Can’t Deduct the Expense

This is the big one. If you don't issue a 1099, the IRS has the power to disallow your business deduction for that contractor's pay.

Think about that $8,000 you paid your web developer. If you fail to file their 1099, you might lose the ability to write that off. Depending on your tax bracket, that could mean paying $2,000+ in extra taxes just because you skipped a $60 form.

2. It Raises Audit Flags

If a contractor reports income on their return but you didn't issue a 1099, the IRS will notice the discrepancy. They’ll want to know why. And once they’re asking questions about your contractor payments, they’re often looking at the rest of your books too.

3. It Damages Professional Relationships

Contractors need their 1099s to file their own taxes correctly. If you don't send one (or send it late with errors), you're making their life harder and potentially delaying their own filing. That’s not a great look if you want to keep working with top-tier talent.

Bottom Line: Fix It Now, Automate It Forever

If you missed the 1099 deadline, don't spiral. File the forms immediately, pay the penalty if one shows up, and move on. The cost of waiting is always higher than the cost of fixing it today.

And once you're through this year's mess, set up a system so it doesn't happen again. Automate your W-9 collection, track your contractor payments year-round, and build in that December review so you're never scrambling in January. Because while the 1099 hangover is miserable, it's also completely preventable.

Need help cleaning up this year's 1099 mess?

We've helped dozens of businesses get compliant, set up automated systems, and stop losing sleep over tax deadlines. Let’s make sure your contractor payments are tracked, your W-9s are on file, and your 1099s go out on time—every time.

See how we can Support You Toward Your Financial High Point.