Preparing for Year-End Form 1099 and Form 1042 Reporting: Why October or November is the Time to Start

October through November is the ideal time to start preparing for Form 1099 and Form 1042/1042-S reporting. While the filing deadlines may seem far off, early preparation helps ensure timely, accurate submissions and reduces the year-end strain on your team.

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Key Deadlines to Keep in Mind

Most Form 1099 returns must be:

• Furnished to recipients (usually payees from an AP perspective) by January 31, and

• Filed with the IRS by March 31 (if filed electronically).

Paper filers must submit by February 28, though the IRS now requires electronic filing in most cases for all information returns.

Form 1042 and Forms 1042-S returns are due March 15 (unless extended). Year-end or quarterly end close deadlines and the holiday season approaching, October/ November is the best time to get ahead.

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Step 1: Identify Who Is Responsible for Reporting

Information returns are filed on an entity basis. For disregarded entities (DREs), the owner of the DRE is responsible for reporting, not the DRE.

Tip: If a DRE withheld and remitted taxes to the IRS, consult a tax professional. The IRS is not always able to match the DRE withholding account with deposit amounts to the entity filing the information return, which can lead to notices and penalties.

Within each entity, consolidate data across all business units.

For example, if two departments paid the same vendor, that vendor may be required to receive one consolidated information return, depending on the facts and circumstances.

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Step 2: Determine Your Reportable Population

Depending on your business processes, you may already have a defined list of reportable recipients. If not, review all recipients to identify who should be included.

Best Practice: Even if you maintain a reportable list, sample the excluded recipients to confirm none were removed in error.

Focus your review on the following areas:

• Payment Type – Is it reportable?

  • Some Form 1099 payments are exempt.

  • For Form 1042-S reporting, U.S. source payments to foreign persons are reportable; non-U.S. source payments generally are not.

•  Payment Amount – Does a dollar threshold apply?

  • Yes, for many Form 1099 payments.

  • No thresholds apply for Form 1042-S reporting.

• Recipient Type – Is the recipient exempt?

  • Under most Forms 1099, there is a list of entity types define as exempt recipients. For example, Corporations, but for certain payment types, and tax-exempt entities are typically exempt from Form 1099 reporting.

  • Exemptions are rare under Form 1042-S reporting based on recipient type.

• Withholding – Does any apply?

  • Backup withholding (24%) may apply under Form 1099 rules.

  • Withholding at 30% generally applies to foreign recipients under Form 1042-S unless reduced by certain provisions within the Internal Revenue Code or by treaty.

• Recipient Information – Do you have valid documentation?

  • For Form 1099s, ensure the name and TIN match IRS records. Conduct TIN matching no later than November to allow time to obtain corrections from the recipient, where needed.

  • The draft Form W-9 (Rev. January 2026) clarifies that:

    • Sole proprietors must provide their SSN, not an EIN. This is the approach most tax practitioners take but technically this will not be required until the draft form is finalized and thus will impact next year’s reporting.

    • Disregarded entities must provide the owner’s TIN. This has always been the appropriate approach.

  • For Form 1042-S, confirm Forms W-8 or 8233 are current and complete.

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Step 3: Confirm Your Reporting System or Vendor Is Ready

Before the end of the year, ensure your reporting software or managed service is ready to handle updated templates and IRS changes for electronic reporting. Review:

• Publication 1220 (Sept. 2025) updates,

• Any new or revised form instructions (e.g., new Chapter 3 status or income codes for Form 1042-S),

• Consider initiating test filings in FIRE and IRIS, depending on what system will be used. for Form 1042-S and IRIS for Form 1099, and

• Understand state filing requirements.

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Additional Tips for a Smooth Reporting Season

1.       Document Procedures: Maintain clear, step-by-step internal procedures to guide your team.

2.       Cloud-Based ERP Systems: Modern systems can be designed for all necessary data to be collected and tracked throughout the year.

3.       Stay Ahead of Change:

• Starting with Tax Year 2025, Form 1042-S can be filed using IRIS (requires an IRIS TCC).

• Tax Year 2026 is targeted as the final year for the FIRE system before the full transition to IRIS.

• For 2025, threshold for Form 1099-K reporting has reverted to the original requirements of reporting, which is $20,000 in payments, and more than 200 transactions a year.

• Thresholds for Forms 1099-NEC and 1099-MISC will be updated next year.

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Final Thought

Getting a head start in October or November allows you to identify potential reporting issues early, coordinate across departments, and ensure systems are ready. By doing so, your organization can approach the reporting season with confidence, accuracy, and less stress.

* The information in this document is provided for general guidance only and does not constitute accounting, tax, or other professional advice. It is accurate as of the publication date and may not reflect subsequent regulatory updates.