Yes — a contractor gets a Form 1099-NEC from any business that paid them $2,000 or more for services during the calendar year. That threshold applies to tax years beginning after 2025, up from the long-standing $600 figure, following changes in the One Big Beautiful Bill signed in 2025.1Internal Revenue Service. 2026 Publication 1099 The business sends one copy to the contractor and files another with the IRS, which then matches that number against what the contractor reports on their return. Starting in 2027, the $2,000 amount will adjust annually for inflation.
What Counts Toward the $2,000
The threshold captures all fees, commissions, and other compensation paid for services during the year. Non-cash payment counts too: if you hand a contractor equipment or other property instead of money, the fair market value goes toward the total.2Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC Travel reimbursements count when the contractor doesn’t give you an accounting of the expenses.
The reporting rule only applies to payments made in the course of a trade or business.3Office of the Law Revision Counsel. 26 USC 6041A – Returns Regarding Payments of Remuneration for Services and Direct Sales Paying someone to paint your house or fix your personal car does not trigger a 1099, no matter how much you spend. Once the payment is business-related, even for a side business, it counts.
Which Contractors Actually Receive One
Payments to individuals, sole proprietors, partnerships, and most LLCs require a 1099-NEC. An LLC is off the list only if it has elected to be taxed as a C-corporation or S-corporation.2Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
Corporations are generally exempt for standard services, but two categories break that rule:
- Payments to attorneys and law firms must be reported on a 1099-NEC regardless of corporate status, including fees paid to a law firm organized as a corporation.2Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
- Payments to physicians and other health care providers must be reported on Form 1099-MISC, box 6, even when the provider is a corporation. Tax-exempt hospitals and government-operated facilities are excluded.2Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
Because these rules turn on entity type, you need each contractor’s tax classification on file before payments start.
When Payment Method Sends It to a 1099-K Instead
How the contractor got paid decides which form reports the income. Payments by check, cash, or direct bank transfer are on the business to report via 1099-NEC. Payments made through credit card, debit card, or a third-party network like PayPal or Venmo get reported by the payment processor on Form 1099-K, and the business should not also report those same payments on a 1099-NEC. That would create duplicate reporting.4Internal Revenue Service. Form 1099-K FAQs – Third Party Filers of Form 1099-K
The 1099-K threshold for third-party settlement organizations requires more than $20,000 in payments and more than 200 transactions before the processor must file.5Internal Revenue Service. IRS Issues FAQs on Form 1099-K Threshold Under the One, Big, Beautiful Bill Card transactions have no minimum. So if you paid a contractor entirely through a credit card, you have no 1099-NEC to file for that contractor.
Getting the Contractor’s Information First
Form W-9 is what supplies everything needed to prepare a 1099-NEC: the contractor’s legal name, business name if different, mailing address, tax classification, and Taxpayer Identification Number, either a Social Security number or an Employer Identification Number. Ask for it before the first payment goes out. Chasing paperwork in January is far harder than collecting it upfront. Signing the form, the contractor certifies under penalty of perjury that the TIN is correct and that they are not subject to backup withholding.6Internal Revenue Service. Form W-9 (Rev. March 2024) – Request for Taxpayer Identification Number and Certification
The IRS offers a free TIN Matching Program through its e-Services portal that verifies a name-and-TIN combination against IRS records before you file.7Internal Revenue Service. Taxpayer Identification Number (TIN) Matching Tools Catching a mismatch before filing saves a penalty notice later.
If a contractor refuses to provide a TIN, gives you a wrong one, or the IRS notifies you of a name/number mismatch, you have to withhold 24% of each payment and send it to the IRS. That is backup withholding, and the payer is on the hook for the amount if it’s not done.8Internal Revenue Service. Backup Withholding Amounts withheld are reported and deposited on Form 945.9Internal Revenue Service. Instructions for Form 945
Filing Deadline and How to Send It
Both copies of the 1099-NEC share one deadline: January 31. By that date, Copy B goes to the contractor and Copy A goes to the IRS.10Internal Revenue Service. General Instructions for Certain Information Returns (2025) There is no automatic extension.
Businesses filing 10 or more information returns of any type combined, counting W-2s filed with the Social Security Administration, must file electronically.11Internal Revenue Service. General Instructions for Certain Information Returns (2025) That threshold catches most businesses. The IRS offers a free option through its IRIS Taxpayer Portal, where you can key in data, upload a bulk file, or submit corrections.12Internal Revenue Service. File Form 1099 Series Information Returns for Free Online Paper filing is still available for businesses with fewer than 10 total information returns.
If you spot an error after filing, submit a corrected 1099-NEC through the same portal. One trap on paper: do not check the “VOID” box on a corrected form. That tells IRS scanners to skip it, so the correction never gets recorded.2Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
Penalties for Late or Wrong Filings
Missing January 31 triggers tiered penalties that grow the longer you wait. For returns due in 2026:13Internal Revenue Service. Information Return Penalties
- Up to 30 days late: $60 per form.
- 31 days late through August 1: $130 per form.
- After August 1 or never filed: $340 per form.
- Intentional disregard: $680 per form, with no maximum cap.
These add up fast. A business missing the deadline on 50 contractor filings can face thousands in fines. Small businesses get lower maximum caps on unintentional late filings, but the per-form amounts are the same. The same penalties apply to a return filed on time with a wrong TIN or wrong dollar amount.11Internal Revenue Service. General Instructions for Certain Information Returns (2025) Many states also require 1099-NEC filings and set their own late penalties, which vary widely; some states participate in a combined federal/state filing program where the IRS forwards your federal filing automatically.
What Getting a 1099 Means for the Contractor
Receiving a 1099-NEC means the IRS expects you to pay the taxes on that income yourself. The first surprise for new contractors is self-employment tax, which covers Social Security and Medicare. Employees split those with their employer; contractors pay both halves. That’s 15.3% on net self-employment earnings up to $184,500, broken into 12.4% for Social Security and 2.9% for Medicare.14Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)15Social Security Administration. What Is the Current Maximum Amount of Taxable Earnings Above that ceiling the Social Security portion drops off but Medicare continues, and an additional 0.9% Medicare surtax applies to self-employment income above $200,000 for single filers.
You owe self-employment tax once your net earnings reach $400 for the year.14Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) Here’s the point that trips people up: you owe tax on the income whether or not a 1099 shows up. If a client pays you $1,500 and the new $2,000 threshold means no 1099 gets filed, that income still has to be reported.
Since no one is withholding taxes as you get paid, the IRS expects quarterly estimated payments. The 2026 due dates are April 15, June 15, September 15, and January 15, 2027.16Internal Revenue Service. 2026 Form 1040-ES – Estimated Tax for Individuals Skipping those and settling up in April leads to underpayment penalties, even if you pay the full balance when you file.