Yes — if you paid an independent contractor $2,000 or more during 2026 for services in the course of your trade or business, and you paid by cash, check, or direct bank transfer, you generally have to send that contractor a Form 1099-NEC and file a copy with the IRS. The $2,000 figure is new: the One Big Beautiful Bill Act, signed July 4, 2025, raised the reporting threshold from $600 for payments made after December 31, 2025.1Internal Revenue Service. Form 1099 NEC and Independent Contractors The threshold will adjust for inflation starting in 2027.
When You Have to Send a 1099-NEC
Four conditions have to line up. The payment was for services, not goods. The recipient is not your employee. You paid $2,000 or more in total across the calendar year. And the payment was made in the course of your trade or business.1Internal Revenue Service. Form 1099 NEC and Independent Contractors
That last condition matters. Hiring a neighbor to mow your personal lawn does not trigger a 1099 obligation, no matter how much you paid, because it is not a business expense.2Internal Revenue Service. Am I Required to File a Form 1099 or Other Information Return
Form 1099-NEC covers fees, commissions, and other compensation for work performed outside an employer-employee relationship. Different payments go on Form 1099-MISC, which still uses a $600 threshold and covers rent, prizes and awards, medical and healthcare payments, and gross proceeds paid to attorneys in settlements.3Internal Revenue Service. About Form 1099-MISC, Miscellaneous Information
When You Don’t Have to Send a 1099
Several common situations look like they need a 1099 but don’t.
Payments to corporations. You generally do not send a 1099 to a C-corporation or S-corporation. If the W-9 you collected shows the contractor is incorporated, you can skip the 1099.2Internal Revenue Service. Am I Required to File a Form 1099 or Other Information Return Two exceptions cut through this rule: payments for legal services and for medical or healthcare services must be reported even when the recipient is a corporation.
Payments made by credit card, debit card, or third-party app. If you paid the contractor through a card or a payment network like PayPal or Venmo (business transactions), you do not report those payments on a 1099-NEC. The payment processor handles the reporting on Form 1099-K.4Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025) This trips up a lot of small businesses: if you paid a designer $3,000 entirely through a business credit card in 2026, you owe no 1099-NEC for that designer.
Contractors paid under $2,000. If your total payments to a given contractor for the year stayed below the threshold, no 1099-NEC is required for that person. Count carefully across the whole year, not per invoice.
Get a W-9 Before You Pay
To complete a 1099, you need the contractor’s legal name, address, and taxpayer identification number. Form W-9 is how you collect it. The TIN is usually a Social Security Number for individuals or an Employer Identification Number for business entities.5Internal Revenue Service. Form W-9 (Rev. March 2024) – Request for Taxpayer Identification Number and Certification
Ask for the W-9 before you release the first payment. Keep completed forms in your records; you do not send them to the IRS. If you want to catch typos before filing, the IRS TIN Matching service lets registered payers verify a name-and-TIN combination against IRS records, either one at a time or in bulk.6Internal Revenue Service. Taxpayer Identification Number (TIN) Matching
If a Contractor Won’t Provide a TIN
When a contractor refuses to give you a valid TIN, or the IRS notifies you that the TIN provided is wrong, you must withhold 24% of each reportable payment as federal income tax.7Internal Revenue Service. Topic No. 307, Backup Withholding This is backup withholding. The amounts withheld are deposited with the IRS and reported on Form 945, the Annual Return of Withheld Federal Income Tax.8Internal Revenue Service. Important Backup Withholding Deadlines Backup withholding stops once you get a valid TIN. Most contractors provide one quickly when the alternative is losing a quarter of every check.
Deadlines
Form 1099-NEC is due to both the IRS and the contractor by January 31, whether you file on paper or electronically.4Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025)
Form 1099-MISC works differently. Contractor copies are due January 31. The IRS copy is due February 28 on paper or March 31 electronically. When any deadline falls on a Saturday, Sunday, or legal holiday, it moves to the next business day.
How to File
If you are filing 10 or more information returns of any type during the calendar year, you must file electronically. The 10-form count combines every kind of information return you issue: W-2s, 1099-NECs, 1099-MISCs, and others, all added together.9Internal Revenue Service. Topic No. 801, Who Must File Information Returns Electronically
The IRS is moving electronic filing to a system called IRIS (Information Returns Intake System). The legacy FIRE system is targeted for retirement after the 2026 tax year, and IRIS will be the only electronic intake system starting with filing season 2027.10Internal Revenue Service. Filing Information Returns Electronically (FIRE) If a payroll or tax service handles your filings, confirm the provider is set up for IRIS. Businesses filing fewer than 10 returns can still use IRIS voluntarily; it is free and accepts both individual entries and bulk uploads.
Penalties If You Don’t Send a 1099
The IRS charges a per-form penalty for each 1099 you file late, file incorrectly, or fail to file at all. For returns due in 2026:11Internal Revenue Service. Information Return Penalties
- Filed up to 30 days late: $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 annual cap
The same schedule applies if you fail to furnish a correct copy to the contractor, meaning a single missing 1099 can generate two penalties: one for the IRS copy and one for the payee copy. Annual maximum caps apply at every tier except intentional disregard, and small businesses with average annual gross receipts of $5 million or less qualify for reduced maximums.
Fixing a Mistake After You File
If you discover a wrong dollar amount, code, or checkbox after filing, prepare a new 1099 with the correct information, check the “CORRECTED” box at the top, and submit it with a new Form 1096 as the transmittal. Send corrected copies to both the IRS and the contractor.12Internal Revenue Service. 2025 General Instructions for Certain Information Returns
Wrong-name or wrong-TIN errors take a two-step correction: first, a corrected return that mirrors the original with all dollar amounts zeroed out, which tells the IRS to disregard the first filing; then a brand-new return with the correct name or TIN and the actual amounts, filed without the “CORRECTED” box checked. Note the reason (“Filed To Correct TIN,” “Filed To Correct Name,” or “Filed To Correct Return”) in the bottom margin of the accompanying Form 1096.
State Filing
Many states require 1099 information to be filed with the state revenue department as well. The IRS Combined Federal/State Filing Program forwards your electronically filed 1099 data to participating states at no charge, and both 1099-NEC and 1099-MISC are eligible.13Internal Revenue Service. Combined Federal/State Filing (CF/SF) Program Not every state participates, and some participating states still want a separate filing for certain forms. Check with your state tax agency before you rely on the federal pass-through, because state penalties stack on top of the federal ones.