You’re running out of days to get your 1099-NEC filings right, and a missed deadline or incomplete record costs you thousands in penalties and headaches with the IRS. If you paid any nonemployee contractors $600 or more during 2025, you owe federal 1099-NEC forms—and in Florida, you may owe state reporting as well. The last thing you want in mid-January is a call from your accountant asking why your contractor payments don’t match what you filed. This seven-step checklist walks you through exactly what needs to happen between now and year-end so you can file with confidence and avoid the scramble.
Whether you’re the business owner juggling the back office yourself, or the CPA supporting one, see how the platform keeps the numbers organized — your first period is completely free, no credit card required.
Does this apply to your business in Florida?
You must file a federal 1099-NEC if you paid any independent contractor, freelancer, or vendor $600 or more in a single year. The Florida Department of Revenue also requires reporting of certain contractor payments on the DR-15, especially when sales tax is involved—for example, if you paid a contractor for labor or materials in a taxable service. Florida rules treat labor and materials differently: when labor is separately stated, it is not subject to sales tax; materials are always taxable. Lump-sum contracts create risk because the entire amount may be treated as taxable income unless you itemize labor and materials.
Step 1: Verify your contractor vs. employee classification
Before you file any 1099, confirm that each person you’re reporting was truly an independent contractor and not an employee. The IRS uses a three-part test: control (do you control how they do the work?), risk (do they bear business risk?), and relationship (is it ongoing or one-off?). If you treated someone as an employee for tax withholding but are now thinking about filing a 1099, stop and consult your accountant. Misclassification leads to wage and hour disputes, back payroll taxes, and penalties. This is one of the easiest mistakes to make and one of the hardest to fix after the fact.
Step 2: Gather all contractor payment records
Pull every invoice, check register entry, and credit card transaction tied to contractors for the entire 2025 calendar year. Group them by contractor name, business name, and Employer Identification Number (EIN) or Social Security Number (SSN). You need the total amount paid to each contractor. If you use accounting software or a payment platform, export a contractor-by-contractor summary. Don’t estimate or guess—if you file a 1099 with the wrong payment amount, you’ll have to file a correction, and the contractor’s records won’t match the IRS filing.
Step 3: Obtain current contractor information and addresses
For every contractor you paid $600 or more, you need their legal name, complete mailing address, and either their EIN (if they have a business) or SSN. Contact each contractor now and ask for this information in writing—request it via email so you have proof. Many contractors change addresses or business names mid-year, and a wrong address on the 1099 creates compliance headaches. If a contractor refuses to provide their SSN or EIN, you’re required to backup withhold 24% of future payments, so get this squared away immediately.
Step 4: Categorize labor and materials for Florida sales tax reporting
This is where Florida contractors and service providers often stumble. If you paid contractors for work in a service that’s subject to sales tax, you must separate labor costs from material costs on your DR-15. When labor is separately stated, it is not taxable; materials are always taxable. For example, if you hired a plumber and the invoice was $2,000 labor + $500 parts, you report only the $500 parts as taxable. If you paid a lump sum of $2,500 with no breakdown, the entire $2,500 could be treated as taxable by the Florida Department of Revenue unless you can prove otherwise. Email each contractor now and request an itemized breakdown of labor versus materials if you don’t already have one.
Step 5: File Form 1099-NEC with the IRS and Florida
You must file federal 1099-NECs by January 31, 2026. The IRS has moved to a fully electronic filing system through FIRE (Filing Information Returns Electronically). Go to the IRS website, create a PIN, and upload your 1099-NEC data as required. For Florida, you must file a DR-15 (Sales and Use Tax Return) by the 20th of the month following the reporting period if you have sales tax liability. If you have contractor payments but no sales tax liability, you typically don’t need to file a separate DR-15, but confirm this with your accountant or the Florida Department of Revenue. Keep copies of everything you file for your records and for your CPA’s year-end review.
Step 6: Send copies to contractors and document your work
After you file with the IRS, send Copy B of the 1099-NEC to each contractor by January 31, 2026. This is not optional—contractors need their copy to file their own tax returns. Mail it with a cover letter or send it electronically if the contractor has agreed to e-delivery. Also send a copy to Florida if required for your DR-15 filing. Keep a log of who received what and when. This documentation protects you if the IRS or Florida ever audits and asks for proof of filing.
Step 7: Store records and reconcile with your CPA
Before you close out 2025, organize your 1099-NEC filings, contractor payment records, invoices, and the labor/materials breakdowns in one folder. This is your audit trail. When you meet with your CPA or accountant to close your books, bring this folder. They’ll reconcile your contractor expenses against what you filed to make sure there are no gaps or mismatches. If you use a platform like Outsourcing Processing, you can store and categorize all contractor transactions and generate a summary report ready for your CPA’s review—so your accountant spends less time hunting for data and more time reviewing your actual tax position.
Common mistakes to avoid
Mistake 1: Underreporting contractor payments because you don’t track them separately. Many small business owners lump contractor costs into “contract labor” or “professional services” in their accounting software without ever running a total. If you get audited and your books don’t match what the contractors reported to the IRS, you face penalties and interest. Fix: Run a contractor-only expense report in your accounting software every November. Add it up. Make sure it matches the 1099s you’re about to file.
Mistake 2: Filing a 1099 for someone who should have been a W-2 employee. This creates a mess—the contractor may claim business expenses you paid for, the IRS notices a pattern, and you end up owing back payroll taxes plus penalties. The IRS worker classification test exists for a reason. If you have any doubt, ask your accountant before filing. Fix: Review the three-part test (control, risk, relationship) for each person you’re about to report as a contractor.
Mistake 3: Listing a wrong address or SSN on the 1099. The contractor receives a 1099 with incorrect information, reports different numbers to the IRS, and now the IRS sees a mismatch. You’ll have to file a correction, and the IRS may flag both you and the contractor for review. Fix: Call or email every contractor, confirm their legal name, address, and SSN/EIN in writing, and store that info in a spreadsheet. Double-check before you file.
Mistake 4: Failing to itemize labor and materials for Florida sales tax. You paid a contractor a lump sum of $5,000 with no breakdown, you reported the full $5,000 as taxable on your DR-15, but the contractor says $3,000 was labor (not taxable) and $2,000 was materials (taxable). The Florida Department of Revenue may adjust your return and assess penalties for misreporting. Fix: Email contractors now and ask for itemized invoices. If they won’t provide one, do your best to estimate based on your prior knowledge of the scope of work, but note any assumptions in writing.
Frequently Asked Questions
What’s the deadline for filing 1099-NECs?
Federal 1099-NECs must be filed with the IRS by January 31, 2026. You must also send Copy B to each contractor by the same date. Florida DR-15 filings are typically due by the 20th of the month following your reporting period if you have sales tax liability.
Do I file 1099-NECs if a contractor has an LLC or S-Corp?
Yes. If you paid any business entity (LLC, S-Corp, C-Corp, sole proprietor) $600 or more and they are not incorporated as a C-Corporation in many cases, you generally still file a 1099-NEC. The rule depends on the entity type and your relationship. Ask the contractor for their legal business name and EIN, and consult your accountant on specific entity types if you’re unsure.
What happens if I miss the January 31 deadline?
The IRS assesses penalties for late 1099 filings, starting at $50 per form and escalating based on how late you are. You must also correct your records with the Florida Department of Revenue. Filing on time is far cheaper than paying penalties and dealing with follow-up notices.
Can I file 1099-NECs electronically, or do I have to print and mail them?
The IRS requires electronic filing for most businesses through FIRE. You’ll file a single electronic submission covering all your 1099-NECs. Copies sent to contractors can be mailed or delivered electronically if they consent. Check the IRS website for the specific system and timeline.
What if a contractor disputes the amount I reported on their 1099?
If the contractor contacts you with a discrepancy, pull your invoices and payment records immediately. If you made an error, file a corrected 1099 before January 31. If the contractor is wrong, provide them with proof of payment (cancelled check, bank statement, invoice signed by them). Never ignore a disputed 1099—it leads to conflicting filings and IRS inquiries. Your accountant can help mediate if needed.
This article is for general educational purposes and isn’t a substitute for advice from a licensed CPA or tax attorney. Rules vary by jurisdiction and change over time—always confirm current requirements with the Florida Department of Revenue or your advisor.
The 1099-NEC filing season doesn’t have to be a scramble. Treat the seven steps above as a roadmap: verify contractor status, gather records, collect current information, categorize materials and labor, file electronically, send copies, and reconcile with your CPA before year-end. A few hours of focused work now—and a simple system to track and organize contractor transactions—means you start 2026 with clean, compliant records instead of chasing errors in January.
This article is for general educational purposes and isn’t a substitute for advice from a licensed CPA or tax attorney. Rules vary by jurisdiction and change over time — always confirm current requirements with the Florida Department of Revenue or your advisor.
If juggling this alongside the rest of your back-office work feels like too much, this is exactly the kind of process business process outsourcing is built to simplify.