What Every Entrepreneur, Freelancer & Tax Client Must Know

As the 2026 tax season approaches, understanding how Forms W‑9 and 1099 work and what’s changing under current U.S. tax law is critical for business owners, independent contractors, and tax clients. Missing key IRS requirements can lead to penalties — but smart planning can protect your business and cash flow.

What Are Form W‑9 & 1099 — The Basics

• Form W‑9 (Request for Taxpayer Identification Number and Certification) is used by businesses to collect a contractor’s legal name and taxpayer ID (TIN), such as SSN or EIN. The business does not file the W‑9 with the IRS; it keeps it on file to prepare 1099s later.

• Form 1099 series — especially 1099‑NEC for non‑employee compensation — is used by businesses to report payments made to independent contractors and freelancers to the IRS if they are paid $600 or more in a tax year.

 New Draft of Form W‑9 for 2026

The IRS issued a draft Form W‑9 dated January 2026, introducing important clarifications:

• Sole proprietors and disregarded single‑member LLCs must enter the owner’s SSN/TIN, not the business EIN.

• A new certification checkbox was added for U.S. digital asset brokers to claim certain exemptions from reporting. 

Action for businesses: Review and update how you handle W‑9s starting in 2025 so you’re ready when the final 2026 form is released.

 1099‑NEC & Other 1099 Reporting Thresholds

For tax year 2025 (returns filed in 2026):

• You must issue a 1099‑NEC if you paid an independent contractor $600 or more during the year.

Starting with tax year 2026 (returns filed in 2027), the reporting threshold for 1099‑NEC and 1099‑MISC is set to increase to $2,000 — reducing the number of forms small businesses must file.

 1099‑K Thresholds & Gig Economy Updates

The IRS and Congress are actively adjusting reporting requirements for digital payment platforms:

• A recent law (the One Big Beautiful Bill Act) has reinstated the higher 1099‑K threshold of $20,000 and 200 transactions for many third‑party payment reports — meaning most small sellers won’t automatically receive a 1099‑K unless they meet those criteria.

 Even if you do not receive a 1099‑K, you are still responsible for reporting all taxable income on your return.

Important Filing Deadlines for 2026

To stay compliant for tax year 2025 filings:

• Feb 2, 2026: 1099s and W‑2s must be furnished to recipients.

• Feb 2, 2026: Federal e‑filing of 1099 and W‑2 information returns is due.
  Missing deadlines can result in penalties — which have increased due to inflation adjustments. 

Best Practices for Business Owners

 Collect W‑9s before paying contractors — you’ll need the name, address, and TIN for tax reporting.
  Verify TINs via IRS TIN Matching to avoid mismatches and penalties.
  Keep W‑9s up to date — if tax IDs or business classifications change, request a new form.
  Use electronic systems to store W‑9s securely and prepare 1099s efficiently.

Wrapping Up: Compliance Protects Your Business

Tax compliance isn’t just paperwork — it’s a legal requirement that protects your business from fines and audits. Staying up to date on W‑9 and 1099 rules will help you:

• Report income accurately

• Avoid costly penalties

• Maintain clean records for tax filing and growth planning

If you work with contractors or freelancers, understanding these forms is essential — and planning ahead will save time and money during filing season.