GovCon Wednesdays
Estimated Read Time: 5 minutes
As government contractors prepare to close out the year and transition into 2026, one of the most important steps is reviewing vendor payments, ensuring proper documentation, and preparing for updated IRS reporting requirements.
This year is especially important because the One Big Beautiful Bill Act has introduced new reporting thresholds that will take effect for the 2026 tax year. If your business does not prepare now, next year’s filings could become rushed, inaccurate, or non-compliant.
This guide breaks down what GovCons need to do now to ensure a smooth transition into the 2026 reporting season.
What’s Changing for 2026?
Beginning in the 2026 tax year, the IRS is raising the reporting threshold for:
- Form 1099-NEC
- Form 1099-MISC
from $600 → $2,000, with annual inflation adjustments starting in 2027.
This means GovCons must begin preparing NOW:
- Update vendor onboarding forms
- Review vendor payment classifications
- Ensure accurate W-9s are on file
- Confirm accounting systems can track the new thresholds
- Prepare internal processes for the updated IRS rules
The sooner this cleanup happens, the easier your 2026 reporting will be.
Step 1: Review Vendor Payments for 2026 Preparation
Even though the threshold changes begin in 2026, GovCons should:
- Identify vendors who regularly cross the new $2,000 mark
- Update accounts payable procedures
- Flag vendors requiring W-9 updates
- Clean up any duplicates, incorrect names, or missing tax IDs
Accurate vendor records are the foundation of correct 1099 filing.
Step 2: Collect and Verify W-9s
Before 2026 reporting begins:
- Ensure every vendor has a current W-9
- Confirm the legal name, TIN/EIN, and address
- Update vendor classifications (individual, LLC, corporation, etc.)
- Reconcile payments uploaded to your accounting system
Incorrect or missing W-9s are one of the biggest causes of 1099 errors and IRS notices.
Step 3: Organize Charitable Contribution Acknowledgments
If your business made charitable contributions during the year:
- Save acknowledgment letters for donations of $250 or more
- Ensure letters include the organization’s name, date, and contribution description
- Confirm whether goods or services were received and documented
- Store receipts with your year-end financials
These letters are required for IRS substantiation and often reviewed during audits.
Step 4: Prepare Your Records Before Filing Season
For a smooth start to 2026:
- Reconcile vendor totals in your accounting system
- Verify classifications before year-end close
- Provide clean records to your tax professional early
- Update internal policies to reflect the new $2,000 threshold
Accurate 1099 preparation reduces last-minute scrambling and supports compliant financial reporting.
Why This Matters for GovCons
GovCons face higher scrutiny from auditors, DCAA, and federal agencies.
Clean vendor data affects:
- Audit readiness
- Tax reporting accuracy
- Cash flow
- Subcontractor management
- Risk exposure
Starting 2026 with updated processes protects your business and reduces compliance risk.
👉 Check out our GovCon Year-End Tips on YouTube Shorts: https://www.youtube.com/@vsinghcpallc
Coming Up in the GovCon Year-End Closing Series
- ✅Tip #1: Know Your Accounting System & Year-End Checklist
- ✅Tip #2: Communicate Early with Tax Professionals & Auditors
- ✅Tip #3: Reconcile and Analyze Accounts
- ✅Tip #4: Validate Revenue & Lease Entries (ASC 606 & ASC 842)
- ✅Tip #5: Prepare 1099s & Charitable Contributions
- 6️⃣Tip #6: Review Contract Status Reports & Submit Data to Tax/Audit Teams
- 7️⃣Tip #7: Final Wrap-Up — Year-End Complete, What’s Next?