How to File Form 1099-NEC: Who Gets One, the 2026 Threshold and Deadlines

If you paid freelancers or independent contractors this year, you may need to send them Form 1099-NEC, and send a copy to the IRS, by January 31. The rules changed for 2026: the reporting threshold jumped from $600 to $2,000. That means fewer forms for many small businesses, but also a real risk of mixing up years. This guide explains who gets a 1099-NEC, how to file and how to avoid common mistakes.

Warning: This is general information, not tax advice. Verify the current thresholds, deadlines and filing rules in the IRS instructions for Forms 1099-MISC and 1099-NEC, and ask a tax professional about your situation.

What Form 1099-NEC reports

Form 1099-NEC reports nonemployee compensation: payments for services by someone who is not your employee, made in the course of your trade or business. Examples include freelance designers, independent bookkeepers, subcontractors and consultants.

It is not used for:

• Employee wages, which go on Form W-2
• Rent, prizes and certain other payments, which generally go on Form 1099-MISC
• Payments made by credit card or through payment apps for goods or services, which are generally reported by the payment network on Form 1099-K

The threshold: $600 vs $2,000

Tip: When you prepare forms in January 2027 for 2026 payments, use the $2,000 threshold. Do not apply the old $600 rule out of habit, and do not apply the new rule to 2025 payments.

Who gets a 1099-NEC

Generally, you issue a 1099-NEC when all of these are true:

• You paid the person or business $2,000 or more during 2026 (or $600 or more for 2025 payments)
• The payment was for services in your trade or business
• The payee is an individual, partnership or LLC taxed as a sole proprietorship or partnership
• You did not pay them by credit card or a payment app that reports on 1099-K

Payments to corporations are generally exempt, with exceptions such as attorneys' fees, which are reportable even to corporations.

Step 1: Collect a W-9 before the first payment

Ask every contractor to complete Form W-9 before you pay them. It provides:

• Legal name and business name
• Federal tax classification (individual, LLC type, corporation)
• Taxpayer identification number (SSN or EIN)
• Address

If a contractor refuses to provide a TIN, backup withholding rules can apply. Collecting the W-9 upfront avoids a January scramble.

Step 2: Track payments by contractor

Use your accounting software to tag each contractor as a 1099 vendor and record:

• Every payment, with date and amount
• Payment method (check, ACH, card, payment app)
• What the payment was for

Card and payment app payments are generally excluded from your 1099-NEC totals because they are reported elsewhere. Your software can usually separate them if payment methods are recorded correctly.

Step 3: Total the year and identify who qualifies

In early January, run a report of payments by contractor for the year. Exclude:

• Card and payment app payments
• Reimbursed expenses that were separately accounted for, if applicable (check the instructions)
• Payments to corporations, except reportable exceptions

Compare each total with the threshold for that year.

Step 4: Prepare and file

Common filing options:

Electronic filing is required for businesses filing 10 or more information returns in total for a year (verify current rules). Many states also require their own copy; some participate in the Combined Federal/State Filing Program.

Step 5: Send copies to contractors

Contractors need their copy by January 31. You can mail it, or deliver it electronically if the contractor has consented to electronic delivery.

Worked example: a small marketing agency

During 2026, an agency paid:

The agency files two 1099-NEC forms for 2026 payments. Under the old $600 rule, the photographer would also have received one.

Contractor or employee? Get this right first

A 1099-NEC is only correct if the worker is truly an independent contractor. The IRS looks at the whole relationship, often grouped into three areas:

• Behavioral control: do you control how, when and where the work is done, or only the result?
• Financial control: does the worker invest in their own tools, set their own rates, work for other clients and risk profit or loss?
• Relationship: is there a written contract, benefits, or an expectation that the work continues indefinitely as a core part of your business?

State tests can be stricter than the federal one, especially for unemployment insurance and wage laws. If you set someone's schedule, train them in your methods and they work only for you, they may be an employee, which means payroll taxes, withholding and a W-2 instead of a 1099. Misclassification can bring back taxes, penalties and interest. When in doubt, ask a professional before the first payment.

Penalties

Late, missing or incorrect forms can bring per-form penalties that increase the later you file. Filing on time with accurate information is far cheaper than correcting errors later. If you discover a mistake, file a corrected form promptly.

1099-NEC checklist

• ☐ W-9 collected from every contractor before the first payment
• ☐ Contractors flagged as 1099 vendors in your software
• ☐ Payment method recorded on every payment
• ☐ Year-end totals by contractor run in early January
• ☐ Correct threshold applied for the payment year
• ☐ Corporations excluded, with exceptions such as attorneys
• ☐ Forms filed with the IRS and state where required by January 31
• ☐ Copies delivered to contractors by January 31

Mistakes to avoid

• Waiting until January to request W-9s
• Including card and payment app payments in 1099-NEC totals
• Using the wrong year's threshold
• Treating workers as contractors when they should be employees
• Forgetting state filing requirements

Your next step

1099s are much easier when your books are clean all year. Bookkeeping & Taxes for Small Business Owners by Omer Muneer Qazi covers chart of accounts, monthly routines, financial statements, how small businesses are taxed, quarterly estimates, deductions, contractors, 1099s and payroll, sales tax, S corporation basics and a year-end checklist.