If you paid a non-employee $2,000 or more for services in the course of running a business during 2026, yes, you have to file a 1099. That figure replaces the longstanding $600 threshold under the One, Big, Beautiful Bill passed in 2025, and it applies only to payments made after December 31, 2025.1Internal Revenue Service. Form 1099 NEC and Independent Contractors If you are filing in early 2026 for the 2025 tax year, the old $600 rule still governs. Beyond the dollar amount, two other questions decide whether a 1099 is required: was the payment made for business purposes, and who received it.
The Dollar Threshold
Congress amended 26 U.S.C. ยง 6041 to raise the general 1099 threshold from $600 to $2,000 for payments made after December 31, 2025, with annual inflation adjustments starting in 2027.2Office of the Law Revision Counsel. 26 U.S. Code 6041 – Information at Source Pay a freelance web developer $1,800 in 2026 and no 1099-NEC is required. Pay them $2,000 or more and one is.
The $2,000 line covers most payments reported on Form 1099-NEC (non-employee compensation) and Form 1099-MISC (rent, prizes, and other categories). A few payment types keep their own thresholds:
- Royalties are reportable at $10 or more under a separate statute.3Office of the Law Revision Counsel. 26 U.S. Code 6050N – Returns Regarding Payments of Royalties
- Any federal tax withheld from a payee under the backup withholding rules must be reported, regardless of the payment total.
- Direct sales of consumer products are reportable at $5,000 or more.
The $2,000 threshold is not retroactive. For payments you made during 2025, use the $600 rule when you file in early 2026.
Only Business Payments Count
The 1099 rules apply only to payments made in the course of a trade or business.4eCFR. 26 CFR 1.6041-1 – Return of Information as to Payments of $600 or More Hiring a plumber to fix the sink at your house is a personal expense, and no 1099 is required no matter what you paid. The same plumber doing work at your office or at a rental property you own is a business payment that counts toward the threshold.
Rental property owners are treated as running a trade or business for these purposes, so payments to contractors, property managers, and repair people at a rental count. Nonprofit organizations are treated the same way despite not operating for profit, and their payments to service providers are subject to the same reporting rules.5Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025)
Who You Paid Matters
Even when the dollar and business-purpose tests are met, some payees don’t get a 1099. Payments to corporations, including C-corporations, S-corporations, and LLCs that have elected corporate tax status, are generally exempt.6Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025) – Section: Exceptions Corporations have their own detailed reporting obligations, so the IRS doesn’t need a duplicate paper trail.
Two exceptions override that. Payments for legal services are always reportable, even when the law firm is incorporated. Medical and healthcare payments to corporations, including professional corporations, also still require a 1099-MISC.7Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025) – Section: Payments to Corporations for Legal Services
Single-member LLCs and multi-member LLCs that have not elected corporate status are treated as individuals or partnerships and do need 1099s when the threshold is met. Tax-exempt organizations are generally exempt from receiving them for most payment types.
Collect a W-9 Before You Pay
The way to sort all of this out in advance is to request a Form W-9 from every payee at the start of the relationship, not in January when you’re trying to file.8Internal Revenue Service. Instructions for the Requester of Form W-9 (03/2024) The W-9 gives you the payee’s legal name, address, entity type, and Taxpayer Identification Number, which is a Social Security Number for most individuals and sole proprietors and an Employer Identification Number for businesses. It also tells you on its face whether the payee is a corporation (probably exempt) or an individual, partnership, or non-electing LLC (probably not).
If a payee refuses to provide a TIN or gives you one that the IRS says doesn’t match, you must withhold 24% of each payment as backup withholding.9Internal Revenue Service. Publication 15 (Circular E), Employer’s Tax Guide Fail to withhold when required and you can be personally liable for the tax, plus penalties and interest.
Foreign Contractors Are Different
A 1099 is not the right form for a foreign contractor. U.S.-source income paid to a nonresident alien is reported on Form 1042-S, and the payer must withhold federal income tax at 30% unless a tax treaty provides a lower rate.10Internal Revenue Service. Federal Income Tax Withholding and Reporting on Other Kinds of U.S. Source Income Paid to Nonresident Aliens Instead of a W-9, you request a Form W-8BEN to establish the payee’s non-U.S. status.11Internal Revenue Service. About Form W-8 BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals) Assume a 1099 covers an overseas contractor and you can end up liable for the 30% you should have collected.
1099-NEC or 1099-MISC
Once you’ve decided a 1099 is required, pick the right one. Form 1099-NEC covers non-employee compensation: payments to freelancers, independent contractors, consultants, and attorneys for services performed for your business.12Internal Revenue Service. About Form 1099-NEC, Nonemployee Compensation If you paid someone off your payroll to do work, this is almost always it.
Form 1099-MISC handles other reportable business payments, including rent for office or commercial space, royalties, prizes and awards, medical and healthcare payments, and crop insurance proceeds.13Internal Revenue Service. Am I Required to File a Form 1099 or Other Information Return The quick sort: paying for services someone performed goes on 1099-NEC; paying rent, royalties, or other non-service categories goes on 1099-MISC.
Form 1099-K is worth mentioning only to rule it out of your filing pile. It is issued by third-party payment platforms like PayPal, Venmo, Etsy, and eBay, not by you, and only when the platform processes more than $20,000 in gross payments to a recipient across more than 200 transactions in a calendar year.14Internal Revenue Service. IRS Issues FAQs on Form 1099-K Threshold Under the One, Big, Beautiful Bill If you paid someone through a platform, the platform handles the reporting.
Deadlines
The recipient’s copy of any 1099 is due by January 31 of the year after the payment. IRS copy deadlines depend on the form and how you file.15Internal Revenue Service. General Instructions for Certain Information Returns (2025) For 2025 payments filed in 2026:
- Form 1099-NEC is due to the IRS by January 31, 2026, on paper or electronically. Because that date falls on a Saturday, the deadline shifts to February 2, 2026.
- Form 1099-MISC and most other 1099s are due on paper by March 2, 2026 (February 28 is a Saturday) and electronically by March 31, 2026.
For tax year 2026 payments filed in 2027, the 1099-NEC electronic filing deadline moves to March 31, aligning it with the other 1099 forms.16Internal Revenue Service. 2026 Publication 1099 (Draft)
Most 1099 forms qualify for an automatic 30-day extension if you submit Form 8809 before the original due date, with no justification required. Form 1099-NEC is the exception: extension requests are not automatic and must include a written explanation.17Internal Revenue Service. Form 8809, Application for Extension of Time to File Information Returns
Paper or Electronic
If your business files 10 or more information returns of any type during the year, you must file all of them electronically.18Internal Revenue Service. Topic No. 801, Who Must File Information Returns Electronically The IRS aggregates almost every return type to reach that count, including 1099s, W-2s, and 1098s.19Internal Revenue Service. Topic No. 803, Electronic Filing Waivers or Exemptions and Filing Extensions Six 1099-NECs and four W-2s puts you over the line. Paper filing when you should be e-filing is treated the same as not filing at all for penalty purposes.
Electronic filings go through the IRS Information Returns Intake System (IRIS), which offers a free online portal and an application-to-application channel for tax software.20Internal Revenue Service. E-file Information Returns With IRIS Paper filers must include Form 1096 as a transmittal summary, with a separate 1096 for each type of 1099.21Internal Revenue Service. About Form 1096, Annual Summary and Transmittal of U.S. Information Returns Electronic filers don’t use Form 1096.
Many states participate in the IRS Combined Federal/State Filing Program, which forwards your 1099 data to the state automatically when you e-file. If your state participates, no separate state filing is required. If not, plan on a second submission.
Penalties for Missing or Wrong Filings
Per-form penalties for 2026 are tiered by how late correct information reaches the IRS:22Internal Revenue Service. Information Return Penalties
- Filed within 30 days of the due date: $60 per form.
- Filed 31 days late through August 1: $130 per form.
- Filed after August 1 or not filed at all: $340 per form.
- Intentional disregard: $680 per form with no maximum cap.
The first three tiers have lower annual caps for small businesses with average annual gross receipts of $5 million or less. The intentional disregard tier has no ceiling at any size. Penalties also apply separately for failing to furnish the recipient’s copy on time, so a single missed 1099 can trigger two penalties, one for the IRS copy and one for the payee statement.
The IRS can waive penalties for reasonable cause if you show that you acted responsibly before and after the failure and that the cause was beyond your control.23Internal Revenue Service. Penalty Relief for Reasonable Cause A strong compliance history, first-time filer status, or IRS-related delays can qualify. Not knowing the rules generally does not.
If You Didn’t Receive a 1099, You Still Owe Tax
One boundary worth stating clearly for the other side of the transaction: the $2,000 threshold is a filing obligation for the payer, not a tax exemption for the recipient. If a client paid you $1,500 for freelance work in 2026, no 1099 is required, but you still have to report that income on your return. All income is taxable regardless of whether an information return was issued.13Internal Revenue Service. Am I Required to File a Form 1099 or Other Information Return