Paid a contractor, an employee or a landlord this year?
So then the IRS wants to know about it. Not just from the recipient of the funds… but from you as well. That’s where information returns come in.
Here’s the problem:
Few entrepreneurs think about taxes until January rolls around. Suddenly there’s frantic scrambling to collect tax IDs and check off little boxes before they’re due. Late fees accumulate quickly if you don’t make that date.
The good news is that it doesn’t have to hurt. Using the right information return filing software, you can get the job done in an afternoon.
Let’s break it down…
What’s inside this guide:
- What Is An Information Return?
- The Main Forms Businesses Must File
- Deadlines And Penalties You Can’t Ignore
- How Information Return Filing Software Helps
What Is An Information Return?
An information return is a tax form used to report income paid to another person.
It’s not a bill. You don’t pay anything at filing. It simply informs the IRS of three things:
- Who you paid
- How much you paid them
- Their tax ID number
The IRS cross-checks your form with the other person’s tax return. If the amounts don’t match… someone receives a letter.
Also your forms are adding to a pile-on pile. In FY 2025, the IRS processed 271.4 million returns and forms, and overwhelmingly, they were e-filed.
That’s why businesses turn to information return filing software these days. Quality filing software imports your payee information, completes every 1099 form and W-2, identifies mistakes and e-files your returns directly to the IRS. Solutions such as AMS information return software can even print and mail forms for your recipients so you have one place to manage the whole filing process.
Simple, right?
However, before you choose a tool you must know which forms apply to you.
The Main Forms Businesses Must File
There are dozens of different information returns. Most small businesses will only ever deal with a few of them. Here are the important ones.
Form W-2
If you have employees, you file a W-2 for each one.
It shows their earnings and the taxes that you withheld from their earnings. Copy A goes to the SSA, and your employee keeps a copy to file their taxes.
Form 1099-NEC
Use this form for freelancers, contractors and consultants. Anybody else you paid for services that are not on your payroll.
And it just changed in a big way.
For many years, that threshold has been $600. But a new federal law increases the $600 threshold to $2,000 for payments made in 2026. Beginning in 2027, that amount will be adjusted for inflation.
That translates into less forms for smaller contractor jobs. However, it also means you’ll have to track totals more diligently… A contractor who cost you $1,900 last year may exceed the limit this year.
Form 1099-MISC
Form 1099-MISC is used for Miscellaneous income. It’s basically catch-all for payments that don’t fall into any other category. Includes rent, prizes, awards and royalties.
Many contractors get this confused with the 10-99- NEC.
Helpful Hint: Place services on the NEC. All other expenditures are placed on the MISC.
Form 1099-K
Payment apps and card processors issue this one. If you run an online store you’ll probably be receiving these instead of filing.
Positive news for sellers. The reporting rule went back to payments of over $20k AND over 200 transactions. Far fewer folks will receive one.
Other 1099 Forms
Depending on your business, you might also deal with:
- 1099-INT for interest payments
- 1099-DIV for dividends
- 1099-R for retirement plan payouts
- 1099-DA for digital asset sales (a brand-new form)
Not sure which one applies? Review all payments made in the past year. Ask yourself one question: Who was paid, and why?
Deadlines And Penalties You Can’t Ignore
Deadlines for filing information returns are rigid. The IRS is not generous with extensions.
The big date is January 31.
That’s when you would file W-2s and 1099-NECs to the government and the employees you paid. All other 1099 forms are due to the IRS on paper by the end of February or if e-filed March 31.
Do you need more time? You may file Form 8809 to request a 30 day extension. Remember to request the extension before the due date.
OK, now the e-file mandate. If you file 10 or more information returns during the year, you are required to file electronically. Returns of ALL types are added together to reach 10. Ten is not that many filings. Hire five employees and five contractors and you’ve hit the limit.
Now the scary part…
Penalties are assessed on a per form basis. They range from $60 per form if corrected within 30 days to $340 per form after August 1. If the IRS deems you willfully ignored the regulations, the penalty is $680 per form, with no maximum.
Twenty late forms can easily turn into a five-figure problem.
The lesson? File on time, even if it’s not perfect, and correct mistakes quickly.
How Information Return Filing Software Helps
Paper forms are tedious to fill out. Each manual step is another opportunity for error.
That’s the job of tax filing software. You don’t need to enter the numbers from your spreadsheet into hundreds of boxes.
Here’s what a good tool should do:
- Import payee data from your accounting system or a spreadsheet
- Check names and tax IDs before you file
- Flag missing data and math errors
- E-file directly with the IRS
- Print, mail or email recipient copies
- Handle state filings where needed
- Make corrections quick and painless
There’s another timing bonus too. The IRS is phasing out its old FIRE system in favor of a new system called IRIS. Current software stays up-to-date with changes like this, so you won’t have to re-learn how to file each year.
It can help you with the new thresholds too. Good software will remember how much you spent with vendors all year long and tell you which ones need a form.
Pretty useful, right?
The best part is how much time it saves. Paperwork that used to take a week can be done in just a couple hours.
The Bottom Line On Information Returns
Information returns are about as fun as they sound. But they are also one of the simplest ways to keep the IRS happy. To summarize in 140 characters or less:
- Information returns report money you paid to others
- The W-2 and 1099-NEC are the most common forms
- The 1099-NEC threshold is now $2,000 for 2026 payments
- File 10 or more forms and you must e-file
- Penalties are charged per form and add up fast
Start planning now. Gather I.T.I.N.’s before you write any checks. And use I.R.F.S. software to do the mundane tasks so that January isn’t a scramble.
Do that, and filing season becomes just another week on the calendar.