Form 1099-NEC is the form your business sends to the IRS and to each contractor. It reports what you paid a non-employee for services in the course of your business during the year. For payments made in 2026 the filing line is $2,000: you file one for each person you paid at least $2,000 for services, up from the $600 line that governed payments made in 2025. The change comes from section 70433 of Public Law 119-21, the One, Big, Beautiful Bill Act, signed July 4, 2025. This is general information; it is not tax advice. The figures were checked in September 2026 and apply to payments made in 2026.
What the form reports
The 1099-NEC goes to the IRS and to the contractor, and both copies carry the contractor's legal name, entity type, and taxpayer identification number, along with the total you paid that person for services in the year. The form is a statement of a number that lives in your books, so its quality depends on the books.
What moved between 2025 and 2026
The $2,000 line applies to payments made after December 31, 2025 and before January 1, 2027, with an annual inflation adjustment for payments made after December 31, 2026. In practice, the forms you sent in January 2026, for payments made in 2025, followed the $600 rule, and the forms you send in January 2027, for payments made in 2026, follow the $2,000 rule. A contractor who got a form last year can fall below the new line this year and get none at all.
The $2,000 amount is fixed for 2026. The IRS says it may be adjusted for inflation beginning in calendar year 2027, so check the figure again before you file for 2027. What did not move is the rest of the machinery: the four-part test, the January date, the e-file rule, and the processor carve-out for card and app payments.
Who gets a form, and who does not
Four conditions have to hold at once: the payment went to someone who is not your employee, it was for services, it was in the course of your trade or business, and it totalled at least $2,000 for the year. If one fails, no form is due. Paying your neighbour to paint your house is not reportable; the IRS says personal payments never are. If a plumber brings parts with the labour, the parts count toward the total when supplying them was incidental to the service, so do not split the invoice into labour and parts before you test the $2,000. A nonprofit is treated as a trade or business for this purpose and files the same forms.
Exhibit 1
The four-part test is where most small payments stop
Then the corporation rule. You generally do not send a 1099-NEC to a corporation, and that includes an LLC that has elected to be taxed as a C or S corporation. Two exceptions cut through it. Attorneys' fees of $2,000 or more get a form even when the firm is a corporation, because the exemption for corporations does not apply to payments for legal services. Medical and health care payments to a corporation are reportable too, but they go in box 6 of Form 1099-MISC instead of on the 1099-NEC. Payments for merchandise, freight, storage and similar items are not reported, and neither is rent paid to a real estate agent or property manager. The W-9 is how you find out which box a vendor sits in.
Card and app payments belong to the processor
If you paid a contractor by credit card or through a payment app, you do not put that payment on a 1099-NEC. The IRS says those payments must be reported on Form 1099-K by the payment settlement entity and are not subject to reporting on Form 1099-MISC or Form 1099-NEC. The result is a clean split: cheques, cash, and bank transfers are yours to report, and card and app payments belong to the processor. This is a reason to keep one payment method per contractor. Split a year between a card and bank transfers and you have to separate the two before you test the $2,000.
Exhibit 2
Card and app payments leave your filing and land with the processor
The 1099-K rule also tells you what your payment app is required to send, which is a floor; an app may send one for less. A processor is only required to issue a 1099-K when payments to a payee exceed $20,000 and the number of transactions exceeds 200. The One, Big, Beautiful Bill retroactively reinstated that threshold, undoing the $600 figure from the American Rescue Plan Act of 2021. None of this changes what is taxable. The IRS states plainly that reporting thresholds do not affect whether income is taxable.
The W-9 is the step that comes first
Form W-9 is how you get a contractor's legal name, entity type, and taxpayer identification number, which is what the 1099-NEC has to carry. It is also where a contractor tells you it is a corporation, which is the fact that decides whether you file at all. The form is addressed to you, and it says so on its face: "Give form to the requester. Do not send to the IRS." You keep it in the contractor's file and you never file it. Getting it signed before the first payment is good practice. There is no IRS deadline for it, but by the time the first invoice lands you want the corporation answer in hand.
The case that bites is the contractor who will not give you a taxpayer identification number. The rule is not that you skip the form. You withhold at a flat 24% and send it to the IRS. The IRS is blunt about who is on the hook: "If you don't collect backup withholding from affected payees as required, you may become liable for any uncollected amount." Once you have withheld any amount under the backup withholding rules, you file a 1099-NEC for that person no matter how small the payment was.
The calendar for 2026 payments
Collect the W-9 before the first payment, keep a running total per contractor through the year, and in January send the contractor's copy and file the IRS copy. The contractor's copy and the IRS copy are both due January 31, whether you file on paper or electronically, and there is no automatic extension, so treat the January date as real. Most other 1099s give you until February 28 on paper or March 31 electronically. The 1099-NEC does not.
Exhibit 3
Two of the four moves on this calendar happen before January
The IRS moves a due date that falls on a Saturday, Sunday, or legal holiday to the next business day, and because January 31, 2027 falls on a Sunday, the deadline for 2026 payments lands on Monday, February 1, 2027. We computed that date, because the IRS 2027 calendar is not out. On the filing side, count every kind of information return you file together, and if the total reaches ten you have to e-file. Six 1099-NECs plus four W-2s is ten. The IRS runs a free portal, IRIS, that lets you e-file up to 100 returns at a time and download the payee copies to send out. To use it you need an IRIS Transmitter Control Code, a five-digit code for your business, and the IRS says the typical application takes about 45 business days, so apply well before January if you will cross the line. Starting with tax year 2026, IRIS is the only intake system the IRS runs, and the old FIRE system shuts down at the end of 2026.
The penalties if a form is late or missing
Missing a 1099 is two penalties, not one. The IRS charges separately for the return it never got and for the statement the contractor never got. For forms due in 2027, the per-form amounts are $60 if you fix it within 30 days, $130 if you fix it after that but by August 1, and $340 if you file after August 1 or never file. A business with average annual gross receipts of $5 million or less is capped at $1,397,000 for the year, which is not a cap that helps anyone reading this. If the IRS decides the failure was intentional, the floor is the greater of $690 per form or 10% of the amount that should have been reported, and there is no annual maximum.
Reasonable cause is a real defence. The IRS says the penalty will not apply to a failure you can show was due to reasonable cause and not to willful neglect, which is another reason the file of W-9s and running totals is worth keeping. Keep the copies for at least three years from the due date, and four years if you withheld anything under the backup withholding rules.
The state line that did not move
Not every state followed the federal change. Wisconsin still requires a Form 1099 for nonwage compensation of $600 or more paid to a Wisconsin resident, and for nonwage payments of $600 or more to a nonresident for services performed in Wisconsin. You can be under the federal $2,000 line and over a state line at the same time. Ask your accountant which states you file in.
The shape that works for a small firm
Put the contractor list in the bookkeeping file, one row per contractor, with the signed W-9 attached to each row. Keep a running total per contractor, and the $2,000 line becomes visible in November instead of January. That is the same rhythm as the monthly bookkeeping one, and it is what makes year-end without a December panic true. In January you need one afternoon: check the totals, pull the W-9s, send and file the forms, and note whether next year crosses the ten-return e-file line. If the bookkeeping that holds all of this is the part that is not running, that is what our bookkeeping service covers.