What to Collect From Subcontractors Before the Year Closes

January is easier when the subcontractor file is ready before the year closes. October is a useful time to find missing records while the crews are still easy to reach.

This checklist is about assembling the file. Use the payment-by-payment 1099 review to decide what belongs on a form, and the 2026 subcontractor reporting guide for the broader filing process.

Start With One File for Each Payee

Keep the W-9, invoices, payment history, and follow-up notes together. Match duplicate vendor entries before adding totals: one subcontractor may appear under a personal name, a trade name, and an abbreviated bank description.

Collect a completed W-9 from U.S. subcontractors early, preferably before the first payment. Do not wait until December as a collection policy. December 31 is the calendar-year payment cutoff, not a universal deadline for obtaining a W-9. A foreign payee needs a separate documentation review rather than automatically receiving this form.

Check the legal name, business name if different, mailing address, taxpayer identification number, and federal tax classification. An LLC label alone does not establish its tax treatment. Follow the IRS W-9 instructions for the owner name and classification of a disregarded entity.

Keep forms with taxpayer identification numbers in a restricted file. The shared follow-up list can say “W-9 missing” without displaying the number itself.

Reconcile the Payment History

Export transactions for the calendar year and compare them with checks, bank activity, cash records, and processor statements. Capture:

• Payee and vendor account used.
• Payment date, amount, and transaction reference.
• Job and invoice supported by the payment.
• Payment method and any processor involved.
• Voids, refunds, duplicates, or items needing review.

Invoice dates alone do not establish the payment year. Do not automatically use the date a check cleared either; a check delivered in December may clear in January. Flag year-end timing differences for review rather than moving them between years to match the bank feed.

Keep the full payment history, including amounts that may be excluded from a 1099. The bookkeeping total and the reporting total serve different purposes.

Describe the Work and Preserve the Payment Method

Attach invoices or a short description showing whether the payment bought services, materials only, or a service package with materials. Do not automatically subtract materials from a subcontractor's service invoice; payments for services can include parts and materials. A separate merchandise-only purchase is a different transaction.

Record card payments and qualifying third-party network transactions separately from checks, direct ACH transfers, and cash. An app name alone does not establish how a payment was processed. Save the transaction detail so the reporting review can identify the correct category without guessing.

Make a Follow-Up List Before the Next Payment

Prioritize missing W-9s, incomplete payee names, unexplained payment methods, and vendors with multiple accounts. Give each open item an owner and a follow-up date.

For 2026, the general federal 1099-NEC threshold for reportable nonemployee service payments is $2,000 per payee. Use that number to prioritize review, not to discard records below it. Backup withholding can trigger reporting regardless of amount. These rules are described in the IRS 1099-NEC instructions.

If a required taxpayer identification number is missing, have the withholding requirements reviewed now. A January reminder may be too late to handle an obligation attached to an earlier payment.

Hand Off a File With Clear Exceptions

Before year-end, the reviewer should receive the W-9 status, complete payment export, supporting work descriptions, payment-method evidence, and an unresolved-items list. After the year closes, reconcile the final December activity before preparing forms.

KDM Accounting Services can help organize the vendor list, reconcile payment records, and identify missing information. For help getting the file ready, contact KDM. For the rest of the books, use the year-end bookkeeping checklist.