Tax season is here. If you're a hospitality business owner still sorting through vendor paperwork, here's exactly where you stand and what to do next.

The Deadlines That Matter

For the 2025 tax year, the IRS required all 1099-NEC forms to be filed and delivered to contractors by January 31, 2026. That deadline has passed. If you filed on time, you're in good shape. If you didn't, keep reading.

Here's the full timeline:

• January 31, 2026: 1099-NEC forms due to both the IRS and contractors (electronic and paper)

• February 28, 2026: Extended paper filing deadline (only if you requested an extension via Form 8809)

• March 31, 2026: Extended electronic filing deadline (with approved extension)

Important: Extensions only apply to filing with the IRS. Contractor copies were still due January 31 regardless of any extension.

If You Missed the Deadline

Don't panic, but don't wait either. The IRS penalty structure escalates the longer you delay:

• 1-30 days late: $60 per form

• 31 days through August 1: $130 per form

• After August 1 or not filed: $330 per form

• Intentional disregard: $660 per form with no cap

For a nightclub or restaurant group working with 80 contractors, filing 30 days late means $4,800 in penalties. Wait until August and that jumps to $26,400. The math is unforgiving.

File now. Every day you wait moves you closer to the next penalty tier.

What Changed for 2026

The IRS has continued tightening enforcement on information returns. A few things hospitality businesses should know:

Lower E-Filing Threshold

If you're filing 10 or more information returns (including 1099-NEC, 1099-MISC, W-2s combined), you're required to e-file. Paper filing is no longer an option for most hospitality businesses. This has been in effect since 2024 but catches operators off guard every year.

Increased Scrutiny on Contractor Classification

The IRS and Department of Labor continue to focus on worker misclassification, particularly in industries with high contractor usage like hospitality. If you're paying someone as a 1099 contractor, make sure the classification holds up. The behavioral control, financial control, and relationship-type tests all matter.

TIN Verification Matters More Than Ever

Incorrect TINs (Tax Identification Numbers) on 1099 forms trigger automatic penalties. The IRS matching program catches these quickly. If you haven't verified your vendors' TINs against IRS records, you're at risk even if you filed on time.

The W-9 Problem That Creates 1099 Problems

Most 1099 filing failures trace back to one root cause: missing or outdated W-9 forms.

Here's the pattern we see constantly in hospitality:

1. A venue hires a DJ, security team, or cleaning crew in a rush

2. Payment goes out immediately—no W-9 collected

3. January rolls around and the office is scrambling to track down tax information from vendors who've moved on

4. Some vendors never respond. Forms get filed late, incomplete, or not at all

The fix isn't trying harder in January. It's building W-9 collection into your payment process so it happens automatically, every time, before a dollar goes out the door.

A Smarter Approach for the Rest of 2026

Tax season shouldn't be a fire drill. Here's how to set yourself up so next January is painless:

1. Collect W-9s Before First Payment

Make it non-negotiable. No W-9, no payment. This one rule eliminates 90% of year-end compliance headaches.

2. Track Every Contractor Payment in Real Time

Don't wait until December to figure out who crossed the $600 threshold. Use a system that tracks cumulative payments to each vendor throughout the year.

3. Verify TINs When You Collect Them

A W-9 with a wrong TIN is worse than no W-9 at all—you think you're compliant, but you'll get penalized anyway. Verify against IRS records upfront.

4. Automate the Filing

If you're still manually entering data into tax software or mailing paper forms, you're spending hours on something that should take minutes. Automated systems generate, file, and deliver 1099s with the data you've already collected.

How Cleo Pay Handles This

Cleo Pay builds compliance into the payment workflow itself. When a vendor onboards through Cleo, their tax information is collected and verified before they can receive a single payment. Every payment is tracked automatically. When January comes, 1099s generate and file with one click.

No chasing vendors for paperwork. No manual data entry. No penalties.

For hospitality businesses managing dozens or hundreds of contractors, this isn't a nice-to-have. It's the difference between a calm January and a $10,000+ penalty bill.

Still sorting out your 2025 filings? Talk to us about getting compliant now and setting up automated filing for the rest of 2026.