Small business

1099-NEC for Contractors 2026: What Changed for You

Updated October 1, 2026

Form 1099-NEC reports what you paid contractors. For payments made after 2025, the reporting threshold rose to $2,000, and the form is still due by January 31, which moves to Monday, February 1 for 2026 payments because January 31, 2027 is a Sunday. Collect a W-9 before you pay anyone.

What Form 1099-NEC is

The IRS says to use Form 1099-NEC to report nonemployee compensation. In plain words, that is money your business paid to someone who is not your employee for services. Think freelance designers, cleaners, drivers, consultants, and other independent contractors.

You send one copy to the contractor and one to the IRS. The contractor uses theirs to report the income on their own return. If you are the contractor, see our guide on side hustle taxes.

It is not the same as a W-2. A W-2 is for employees, where you withhold tax and pay employer taxes. A 1099-NEC is for independent contractors, who handle their own taxes. Whether someone is an employee or a contractor depends on the facts of the working relationship, so do not assume. If you are unsure, ask a qualified professional.

The change for 2026

For years the reporting line was $600. The IRS instructions now say that for tax years beginning after 2025, the minimum threshold for reporting these payments increased to $2,000, and that it may be adjusted for inflation starting in 2027. The law that made the change applies it to payments made after December 31, 2025. That means payments you make in 2026 fall under the new threshold, and the forms are filed in early 2027.

This is not a reason to stop tracking small payments. A contractor still owes tax on income below the line. And your own deduction for what you paid still needs proof, whether or not a form is required. Track every payment by person all year.

A higher threshold may mean fewer forms for a small business that only pays a contractor a few hundred dollars. Still, keep the paperwork for those small payments in case rules change or the total grows over the year. Add up everything you pay one person over the year, not just one bill, and check the IRS instructions for how the threshold applies.

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The deadline

The IRS says Form 1099-NEC must be filed with the IRS and provided to the recipient by January 31. The IRS also says that when a due date falls on a Saturday, Sunday or legal holiday, the due date is the next business day. January 31, 2027 is a Sunday, so for 2026 payments the deadline is Monday, February 1, 2027. Do not wait until January to gather information. The filing is easy when the facts are already collected.

The IRS instructions for recent forms also added new boxes, including boxes to report cash tips, tipped occupation codes, and qualified overtime pay. Most contractor payments will not touch them, but read the instructions if your business pays tipped workers.

Build in a buffer. Mailing addresses go stale, and contractors may be slow to reply. Starting the first week of January leaves room for the follow-ups that always come up.

Get a W-9 first

Form W-9 is how a contractor gives you their legal name, address and taxpayer number. Ask for it before the first payment, not at year end. Chasing people in January is slow and often fails.

Ask every new contractor to complete a W-9 before you pay them.
Keep the signed form with your records.
Check that the name matches what they use on their tax return.
Ask again if a contractor changes their business name or address.

Also consider asking contractors to tell you if their information changes. A returned or rejected form is much easier to fix when you hear about a move or a name change early. Keep every W-9 with your business records, since it shows you asked.

Penalties, in general

The IRS can charge penalties when information returns are filed late, filed with wrong information, or not filed at all. Amounts depend on how late you are and the size of your business, and they change over time, so check the current figures at irs.gov before relying on a number. We do not handle penalty notices for clients. If you receive one, talk to a qualified professional who does IRS representation.

The safest habit is to file on time and to file accurately. Most trouble is avoidable with a signed W-9 and a running list.

If you find a mistake after filing, do not ignore it. Corrections are a normal part of information reporting, and the IRS instructions explain the process. If the situation gets complicated, a qualified professional who handles IRS matters can guide you.

Who this fits and what to gather

This applies if you run a business, including a single-member LLC, and pay independent contractors for services. Payments to a corporation are treated differently in some cases, so keep the facts on each payee.

Gather these:

A list of every contractor, with legal name and address
A signed W-9 for each one
Total paid to each in 2026, by payment date
Records of how you paid them

If your books are tidy, this takes minutes. If they are not, see our bookkeeping page.

Remember your other side of the story too. If you are the contractor, the person who paid you may send a 1099-NEC, but you still report income whether or not you get one. Our self-employed checklist covers what to keep.

A simple yearly routine for contractor payments

The easiest way to handle this is a routine, not a January project.

When you hire someone new, get the W-9 before the work starts.
Each month, add the payments to a running list by contractor.
In November, review the list and flag anyone near or over the $2,000 line.
In early January, confirm names, addresses and totals with each contractor.
File and furnish the forms before January 31.

Keep in mind that payments made by card or through a payment app may be reported by the payment company instead of by you. Ask a qualified professional how that applies to your setup, because those rules are separate from the contractor form.

FAQ

Is the 1099-NEC threshold really $2,000 now?

The IRS instructions say that for tax years beginning after 2025 the reporting threshold increased to $2,000, and the law applies it to payments made after December 31, 2025. Check the current instructions before you file, since the rules can change.

When is Form 1099-NEC due?

The IRS says it must be filed with the IRS and provided to recipients by January 31, and a due date on a weekend moves to the next business day. January 31, 2027 is a Sunday, so for 2026 payments the deadline is Monday, February 1, 2027.

What if a contractor will not give me a W-9?

Keep a written record that you asked, and keep asking. Missing taxpayer information can create problems for filing. A qualified professional can advise you on what else applies.

Can you file my 1099s?

We prepare tax returns. Ask us about what your situation needs, and we will tell you whether it falls within our services.

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General information, not tax advice for your specific situation. Rules can change, and a human preparer reviews your facts before any return is filed. Zero Fuss Taxes is a PTIN-holding tax preparation firm. We are not a CPA firm, enrolled agents or attorneys.

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