Common 1099 and W-9 Mistakes That Could Trigger an IRS Notice (2025 Edition)

Kimberly Green | 2025-04-26

Filing 1099 and W-9 forms might feel like paperwork, but even small errors can lead to IRS notices, backup withholding, or penalties. These forms are how the IRS tracks payments made to contractors—and how businesses prove compliance. Need help? Sam’s List connects small business owners with knowledgeable accountants who handle 1099s, W-9s, and everything in between. Find your new accountant today! Here are the most common W-9 and 1099 mistakes that can cost you—and how to avoid them. What Are the Most Common W-9 Mistakes? Using the wrong Taxpayer Identification Number (TIN) A mismatch between the contractor’s name and TIN can trigger a “B Notice” from the IRS, requiring you to correct and resubmit. Failing to collect a W-9 before payment Always get the form before sending any money. Otherwise, you may not have what you need for year-end reporting. Requesting the wrong business type The W-9 has a checkbox section for entity type (LLC, sole prop, etc.). If the contractor marks the wrong box, it may affect your 1099 reporting. Not updating the W-9 when info changes W-9s aren’t one-and-done. If your contractor changes names, addresses, or business structure, you’ll need a new one. What Are the Most Common 1099-NEC Mistakes? Missing the deadline (January 31, 2025) Late filings result in IRS penalties that increase the longer you wait. Filing for payments under $600 unnecessarily You don’t need to send a 1099-NEC unless you paid a contractor $600 or more during the calendar year. Using the wrong version of the form Make sure you’re using the current 1099-NEC for 2024 payments (not an old one). Incorrect contractor info Misspelled names, wrong TINs, or out-of-date addresses are all red flags. Sending a 1099 to a corporation when it's not required Most corporations don’t need 1099s—except for lawyers and healthcare providers. How Do These Mistakes Affect You? You might get a CP2100 notice (aka a "B Notice") from the IRS if a name/TIN combo doesn’t match their records. You could owe penalties ranging from $60 to $310+ per incorrect or late form. You may need to start backup withholding at 24% if errors aren’t corrected. You risk a small business audit , especially if the mistakes are repeated or appear across multiple contractors. Frequently Asked Questions What happens if I don’t send a 1099-NEC by the deadline? The IRS will likely assess a late penalty, which increases over time. File as soon as possible to minimize the fee. How do I fix a 1099 or W-9 after it’s...

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