Step 1. Identify Your Reportable Payment Types

Review the IRS instructions to determine which payments you must report. For example, you might need to report:

• Non-employee compensation (often now reported on Form 1099-NEC)

• Rents

• Royalties

• Other miscellaneous payments

Tip: Some payments (like payments made to corporations) may be exempt from 1099 reporting. Check the instructions for any exceptions that apply to your vendors.

Step 2. Set Up Custom Categories in Your Records

Whether you use accounting software or a spreadsheet, create custom categories (or accounts) that specifically track payments that require 1099 reporting. For instance:

• 1099 – Non-employee Compensation

• 1099 – Rent

• 1099 – Royalties

• 1099 – Other Reportable Payments

In Accounting Software:
Set up these as expense accounts or vendor classes. This helps ensure that every time you pay a vendor for a reportable service, you post it to the correct account.

In a Spreadsheet:
Create columns that capture both the vendor and the type of payment. This allows you to filter and sum totals by category.

Step 3. Record Each Payment with the Appropriate Details

For every payment you make, record the following information:

• Vendor Name

• Vendor Tax Identification Number (TIN)

• Payment Date

• Payment Description (e.g., consulting fee, office rent)

• Payment Category (select the custom category you set up)

• Payment Amount

Step 4. Track the Cumulative Totals for Each Vendor

Keep a running total for each vendor’s payments in each category. This lets you quickly determine which vendors meet or exceed the IRS reporting thresholds (commonly $600, though thresholds can vary by payment type).

Sample Spreadsheet Template

Below is a sample template that you could use in Excel or Google Sheets:

| Vendor Name     | Vendor TIN   | Payment Date | Payment Description | Payment Category                     | Payment Amount | Cumulative Total (Year) |
|----------------|-------------|--------------|----------------------|--------------------------------------|---------------|-------------------------|
| ABC Consulting | XX-XXXXXXX   | 01/05/2025   | Consulting fee       | 1099 – Nonemployee Compensation     | $500.00       | $500.00                 |
| ABC Consulting | XX-XXXXXXX   | 03/15/2025   | Consulting fee       | 1099 – Nonemployee Compensation     | $150.00       | $650.00                 |
| XYZ Properties | YY-YYYYYYY   | 02/20/2025   | Office Rent         | 1099 – Rent                         | $1,000.00     | $1,000.00               |
| LMN Supplies   | ZZ-ZZZZZZZ   | 04/10/2025   | Equipment lease      | 1099 – Other Reportable Payments    | $700.00       | $700.00

How to Use This Template:

• Filter/Sort: At year-end, filter the sheet by the “Payment Category” or sort by “Vendor Name” to easily review totals.

• Threshold Check: Use the “Cumulative Total” column to quickly see which vendors have reached the IRS threshold for reporting.

• Documentation: Keep a copy of this spreadsheet as part of your records in case you need to verify your 1099 information later.

Step 5. Run a Year-End Review

Before filing your 1099 forms:

1. Review the Totals: Check the cumulative totals for each vendor in each custom category.

2. Cross-Reference Vendor Information: Verify that the vendor’s TIN and other details are correct.

3. Prepare the Forms: Use the information from your custom tracking system to complete the appropriate boxes on your 1099 forms.

https://www.irs.gov/instructions/i1099mec