STEP 01
Build a complete vendor payment population

Start with payments made during the year. An unpaid bills report or an expense account balance alone will not necessarily provide the complete payment population.

Review the sources through which your business pays vendors:

• Accounts payable and bill payment records.
• Bank transactions and manually issued checks.
• Credit card transactions.
• Payment platforms and processor reports.
• Payments recorded through manual accounting workflows.

Keep original exports unchanged. Perform your review in a separate working file so the source records remain available when questions arise.

Reconcile before filtering

Compare the vendor payment report with the underlying accounting records. Investigate missing transactions, duplicate entries, voided payments, and adjustments.

Unpaid bills, prepayments, and other timing differences can explain why an expense balance differs from payments made during the year. Document those differences instead of forcing the totals to match.

STEP 02
Review vendor identity and classification

Duplicate vendor records can split one payee’s payments across several names. Incomplete records can leave the reviewer uncertain about who received a payment or why it was made.

Before preparing the reporting file, review:

• The vendor’s legal name and supporting tax documentation.
• Mailing information and taxpayer identification details.
• Duplicate or inactive vendor records that received payments.
• The nature of the services or goods purchased.
• Classification questions requiring professional review.

Treat missing information as an unresolved item, not an automatic reporting exemption.

STEP 03
Separate payment methods

Payment method can affect federal information reporting for 2026. IRS instructions distinguish payment card transactions and certain third party network transactions from payments reportable by the business on Form 1099-NEC or Form 1099-MISC.

Qualifying transactions fall under the payment settlement entity’s Form 1099-K reporting framework. Do not assume every transaction through a familiar payment app receives identical treatment.

Review how the payment was processed. Maintain a reconciliation showing which payments were included, which were excluded, and why.

Review the IRS instructions for Forms 1099-MISC and 1099-NEC

STEP 04
Create an exception register

Make unresolved questions visible. A short review register helps your team track missing information and document conclusions.

Avoid recording “not reportable” without documenting the reason. A clear decision trail is more useful than a report that simply excludes the vendor.

STEP 05
Test your software output

Check whether your software settings and account mappings produce the intended reporting population. Test the output against supporting records before relying on the final report.

A practical test includes:

1. A vendor with multiple payments across the year.
2. A vendor appearing under more than one record.
3. A vendor paid through more than one payment method.
4. A payment requiring separate classification review.
5. A transaction that was voided, refunded, or corrected.

Investigate unexplained omissions or inclusions. Keep a record of material configuration changes and identify who reviewed the resulting output.

STEP 06
Refresh the review after year end

A November review helps identify problems early, but it is not the final reporting population. Later payments and adjustments still need to be incorporated.

1. Refresh the payment exports.
2. Reconcile the updated population.
3. Resolve remaining exceptions.
4. Review the proposed reporting file.
5. Confirm applicable federal and state filing requirements.
6. Retain submission records and follow up on rejected filings.

If an outside provider handles filing, agree in advance on the confirmation they will supply and who will review it.

Common mistakes to avoid