1099 Season Starts at Approval: Collect the W-9 Before You Pay the Contractor

January 1099s get painful for one reason: the information you need (who the payee legally is, their tax ID, whether they're even reportable) gets collected in a hurry, months after the money went out. By then the contractor has moved on, the invoice is buried in a thread, and someone is digging through the ledger to figure out which payments count.

The fix is boring and it works: decide 1099 status when the purchase is approved, not when the forms are due. If spend requests already start in Slack, that's where the question belongs.

This post covers the US information-return rules. It's process advice, not tax advice; check edge cases with your accountant.

What changed for 2026 payments

For payments made in 2026, the reporting threshold for Form 1099-NEC (nonemployee compensation) and most Form 1099-MISC boxes went from $600 to $2,000. The IRS says it plainly: "For payments made before 2026, the reporting threshold is $600. For payments made in 2026, the reporting threshold is $2,000," and later years will be adjusted for inflation (IRS: Am I required to file a Form 1099). The change comes from section 70433 of the 2025 budget law (OBBBA), effective for payments made after December 31, 2025 (Federal Register, April 17, 2026).

That means fewer forms for many small teams. It does not mean you can stop collecting W-9s. Two reasons:

1. You don't know the year-end total on day one. A $1,200 design job in March becomes $2,400 when the same freelancer does a second round in October. The threshold applies to total payments in the calendar year (IRS Form 1099-NEC FAQ).
2. Backup withholding ignores the threshold. If a payee doesn't give you their taxpayer identification number (TIN), reportable payments like nonemployee compensation can be subject to backup withholding at 24%, and if you backup withhold you have to file and furnish a 1099 "even though the amount of the payment may be below the normal threshold" (IRS Publication 1099 (2026)).

The deadline you're working back from

Form 1099-NEC has to be filed with the IRS and furnished to the recipient by January 31 (IRS: Information return reporting). When the date falls on a weekend or legal holiday, it moves to the next business day (IRS Instructions for Forms 1099-MISC and 1099-NEC). January 31, 2027 is a Sunday, so for 2026 payments that's Monday, February 1, 2027.

That's about three months from today. Enough time to clean things up, if you start now and stop the problem from growing.

Add three questions to service purchases in Slack

You don't need a tax workflow for every request. You need a short branch that only shows up when the purchase is a service from a person or non-corporate business: freelancers, consultants, agencies run as LLCs, attorneys, contract developers.

When a request like that comes in, the requester answers three things before it can be approved:

1. Who is the legal payee? Not "Sam the designer." The legal name and business entity that will be on the invoice and the payment. This is what goes on the 1099, and it's what you match against the W-9.

2. Do we have a W-9 on file? Yes, no, or "requested." If it's a new payee, the request should not go to payment until the W-9 is in. If you already run a new-vendor gate (see New Vendor Gate: Don't Pay Until Onboarding Clears), this is where the W-9 step lives.

3. How will we pay? Card, or bank transfer/check. This matters more than people expect, because of the next section.

The approver sees those answers in the same message as the amount, vendor, and budget line. If the W-9 answer is "no," the approval can still happen, but it's flagged: approved, not payable yet.

Card vs. bank transfer changes who reports

Both QuickBooks Online and Xero leave card payments out of your 1099 totals. QuickBooks excludes "payments made via credit card, debit card, or third-party system, such as PayPal or Venmo," because "the financial institution reports these payments on a 1099-K, so you don't have to" (QuickBooks: Manage contractor and vendor W-9 invites). Xero says its software "excludes credit card payments from your 1099 report" (Xero: Tax compliance).

So the payment method on the Slack request isn't trivia. A contractor paid by ACH is on your 1099 list; the same contractor paid by company card mostly isn't. If your team mixes both for the same payee, capturing the method at approval time is the only way to know later which payments count without reopening every transaction.

This is also where card-first and approval-first tools differ in practice. A card program records the swipe. An approval step records the payee, the purpose, the W-9 status, and the method before money moves, which is the information January actually asks for.

Set up the books side once

The Slack request only helps if the accounting side is ready to receive it.

QuickBooks Online. Mark the vendor with "Track payments for 1099" and enter the legal name and SSN or EIN on the vendor profile (QBO Support: 1099 vendors). Map the expense accounts you use for contractor work (for example, nonemployee compensation on the 1099-NEC) in the 1099 settings so payments flow to the right box (QBO Support: Set up 1099 accounts). QuickBooks can also send W-9 invites from Expenses & Bills → 1099s → Recipients & W-9s and update the vendor profile when the contractor completes it (QuickBooks: W-9 invites), or you can upload a W-9 PDF there (QuickBooks: Upload Form W-9).

Xero. Send the contractor a secure W-9 link, mark them as a 1099 contact in the W-9 management tab, and set rules for which payments go into which 1099-NEC or 1099-MISC box. Xero's own guidance is to "collect W-9s before the first payment" (Xero: 1099 software).

Then the account picked on the Slack request matters. If the requester codes a contractor invoice to an account that isn't mapped to a 1099 box, the payment won't show up where it should. Capturing the GL account at request time (we wrote about that in Code the Purchase in Slack) closes that gap.

A November cleanup you can do this week

For the payments already made in 2026:

1. Pull a list of everyone you paid for services by bank transfer or check this year. QuickBooks builds a recommended list on the Recipients & W-9s tab, already excluding card payments, known corporations, and amounts under $2,000 (QuickBooks: W-9 invites). In Xero, the cash payments by vendor report and the 1099 report do the same job (Xero: Tax compliance).
2. Flag anyone near $2,000. If they're at $1,500 and you expect another invoice in December, treat them as reportable now.
3. Request missing W-9s today, not in January. Contractors answer faster in November than in the last week of January.
4. Check the account mapping on a few contractor payments to make sure they land in the right 1099 box.

What the approval message ends up looking like

Request: Brand illustration, round 2 Payee (legal): Sam Rivera Design LLC Amount: $1,400 · Budget: Marketing / Creative Account: Contract services (mapped to 1099-NEC) W-9: On file Pay by: ACH Year-to-date paid to payee: $1,200 → crosses $2,000 with this payment

(Example data.) The approver doesn't need to know tax law. They just see that this payee is now reportable and the paperwork is already done.

The short version

• The 1099-NEC threshold is $2,000 for 2026 payments, but backup withholding can still trigger a form below it.
• Ask "legal payee, W-9 on file, how we'll pay" on every service request, in the same Slack thread as the approval.
• Card payments mostly fall out of your 1099 totals in QuickBooks and Xero; bank transfers don't.
• Use November to chase missing W-9s. The deadline for 2026 payments is February 1, 2027.