Your January 1099 and Maryland Withholding Checklist for Small Businesses

January is 1099 and W‑2 season, and for Maryland employers it also brings important state withholding filings. This article walks Maryland small business owners through a practical January checklist so they can get Forms 1099‑NEC, W‑2, and Maryland reconciliation forms out the door accurately and on time.

• Why January is so important for 1099s and withholding

   

  If you pay independent contractors, have employees, or withhold Maryland tax, January is one of your busiest compliance months. The work you do now:

   

  • • Makes sure your contractors and employees receive accurate forms.
  • • Ensures that what you file with the IRS and Maryland matches what recipients receive.
  • • Helps you avoid letters, penalties, and amended filings later in tax season.

   

  The good news is that a simple, repeatable checklist goes a long way.

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  Step 1: Identify who needs a 1099‑NEC or 1099‑MISC

   

  Start by reviewing payments you made in 2025.

   

  You generally need to issue Form 1099‑NEC if:

   

  • • You paid $600 or more to a nonemployee (such as an independent contractor, freelancer, or professional) for services in the course of your trade or business.
  • • The payee is not a corporation (there are exceptions—some attorney payments and others may still require a form).

   

  You must file Form 1099-MISC for each person or non-corporate entity to whom you have paid the following during the tax year:

   

  • • Rent: At least $600 paid for office space, machine rentals, or pasture land (unless paid to a real estate agent or property manager).
  • • Prizes and Awards: At least $600 in value for prizes or awards that are not for services performed.
  • • Medical and Health Care Payments: At least $600 paid to a physician, physician's corporation, or other supplier of health and medical services. 

  •      Common scenarios include:

    •           • Employer-Paid Health Services: A company pays a local clinic directly to perform pre-employment drug screenings or physicals for new hires.

    •           • Vaccine Programs: A business pays a pharmacy or nurse directly to come onsite and provide flu shots for employees.

    •           • Expert Witnesses: An insurance company or law firm pays a doctor to provide expert testimony or a medical opinion (if the payment is for the medical opinion/service itself).

    •          • Wellness Programs: A corporation pays a physiotherapist or chiropractor directly to provide ongoing treatment for employees as part of a wellness benefit.

  •  
  • • Payments to Attorneys: At least $600 paid to an attorney for legal services.
  • • Gross Proceeds to Attorneys: Any amount of $600 or more paid in gross proceeds to an attorney (e.g., settlement funds), even if the attorney is a corporation.
  • • Other Income Payments: At least $600 in other income payments not reportable on other specific forms.

   

  Action items:

   

  • • Run a vendor/contractor payment report for 2025 from your accounting or payroll system.
  • • Filter for vendors paid $600 or more and review their entity type (individual, LLC, corporation).
  • • Flag any payees who may need a 1099‑NEC or 1099‑MISC.

   

  If you’re unsure which form is required for a particular payment, make a note to review it with your tax advisor before issuing forms.

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  Step 2: Collect and verify W‑9 forms

   

  Accurate 1099s start with complete W‑9s.

   

  • • Confirm you have a Form W‑9 on file for each contractor or other payee that may need a 1099.
  •  Check that the W‑9 includes:
    •      • The legal name and business name (if different).
    •      • Tax classification (individual/sole proprietor, partnership, C corporation, S corporation, LLC, etc.).
    •      • Correct mailing address and Taxpayer Identification Number (TIN).

   

  If you’re missing a W‑9:

   

  • • Reach out right away and request a completed W‑9.
  • • Let payees know that without it, you may have to apply backup withholding or delay payment.

   

  Doing this early in January gives you time to follow up before forms are due.

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  Step 3: Match your totals and prepare 1099‑NEC forms

   

  Before you create any forms, reconcile your information.

   

  • • Compare total payments per contractor from your accounting system to what you plan to report on each 1099‑NEC.
  • • Exclude any amounts that are clearly not reportable (for example, reimbursements properly documented under an accountable plan).
  • • Verify that the name and TIN on the draft form match the W‑9 on file.

   

  Once you’re comfortable with the totals, you can:

   

  • • Use IRS‑compatible software or your payroll provider to generate 1099‑NEC forms.
  • • Review the forms on screen before printing or e‑filing.

   

  Remember that the same payment information will go to the contractor, the IRS, and in many cases the state, so accuracy here is critical.

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  Step 4: Coordinate W‑2s and federal filings

   

  Most Maryland employers who issue 1099‑NEC forms also issue W‑2s to employees.

   

  In the same January window, you should:

   

  • • Reconcile 2025 payroll totals from your payroll software to what will appear on each W‑2.
  • • Confirm that Social Security, Medicare, and federal income tax withholding totals match your prior quarterly Form 941 filings.
  • • Prepare W‑2s for employees and plan for filing with the Social Security Administration (SSA).

   

  The due dates for providing W‑2s to employees and 1099‑NEC forms to contractors, and for filing with the IRS/SSA, effectively fall in early February 2026 due to the weekend adjustment.

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  Step 5: Prepare your Maryland MW508 reconciliation

   

  For Maryland employers, January also brings the annual withholding reconciliation.

   

  • Form MW508 summarizes:
    • • Total Maryland tax you withheld from employees in 2025.
    • • The total of all Maryland withholding reported on Forms W‑2 (and certain 1099s, if applicable).

   

  Checklist for MW508:

   

  1. • Pull your 2025 Maryland withholding totals from payroll reports.
  2. • Confirm that those totals match:
     •      • The sum of quarterly or monthly MW506 filings.
     •      • The Maryland withholding boxes on your W‑2s.
  3. • Use Maryland’s bFile or Tax Connect system to complete and submit Form MW508 electronically.
  4. • Upload or transmit the required W‑2 (and 1099, if required) file to Maryland.

   

  Aim to have this completed by the official deadline—effectively the end of January or the first business day in February.

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  Step 6: Organize your records

   

  After everything is filed and furnished:

   

  • • Save PDF copies of:
    •      • Filed 1099‑NEC forms
    •      • Filed W‑2s and W‑3
    •      • Maryland MW506 and MW508 forms
    •      • Submission confirmations from the IRS, SSA, and Maryland bFile
  • • Store these in a clearly labeled folder titled clearly for 2025–2026 payroll and contractor reporting.

   

  These records will be invaluable if a notice arrives or if you need to confirm amounts when preparing your income tax return.

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  When to call in help

   

  You should consider reaching out for professional help if:

   

  • • You’re issuing 1099s for the first time and aren’t sure who qualifies.
  • • Your contractor or employee totals don’t match between your books, draft forms, and prior filings.
  • • You’ve received an IRS or Maryland notice in the past related to 1099, W‑2, or withholding issues.

   

  AllTax can work from your existing records, help clean up any inconsistencies, and put a repeatable, documented January process in place for future years.

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  How AllTax can support your January checklist

   

  AllTax helps Maryland small businesses:

   

  • • Review vendor and contractor lists to identify who really needs a 1099‑NEC or 1099‑MISC.
  • • Set up or refine systems for collecting and storing W‑9 forms.
  • • Coordinate preparation and filing of 1099s, W‑2s, and Maryland MW508.
  • • Reconcile payroll and withholding so that your federal and Maryland filings all agree.

   

  If you’d like a done‑with‑you or done‑for‑you process for 1099s and Maryland withholding, reach out to AllTax. We can take the stress out of January so you can stay focused on running your business.