Last updated: October 25, 2026. This article is for general information only and is not tax, legal, or financial advice. Reporting rules depend on your entity type and the kind of payment, so confirm details with the IRS (Instructions for Forms 1099-MISC and 1099-NEC) or a qualified tax professional. This guide is not affiliated with the IRS.
For decades, small businesses sent a Form 1099 to almost any contractor they paid $600 or more. That number was never adjusted for inflation, and it created paperwork for payments most owners considered small. For payments made after December 31, 2025, the IRS instructions state that the minimum threshold for reporting these payments rose to $2,000. The first returns affected are the ones you file in early 2027, so the practical time to get ready is now, while you can still collect missing information.
The Short Answer
- New threshold: $2,000 for payments made in 2026, up from $600. The threshold applies to Forms 1099-NEC and 1099-MISC.
- Inflation indexing: the IRS says the amount may be adjusted for inflation starting in calendar year 2027.
- Backup withholding: the IRS instructions say the higher threshold also applies to the backup withholding threshold for these payments.
- Deadline for 1099-NEC: January 31 each year, both to the IRS and to the contractor. Because January 31, 2027 falls on a Sunday, the next business day, February 1, 2027, applies.
- Taxes still apply: contractors owe tax on all self-employment income, even when you are not required to send a form.
What Changed
The change was part of the One Big Beautiful Bill Act of 2025, which raised the reporting threshold for most payments reported on Forms 1099-NEC and 1099-MISC. According to the IRS instructions, the new level applies to payments made after 2025, so a $1,500 payment to a freelance designer in 2026 would no longer require a 1099-NEC, while it would have in 2025.
The IRS instructions also describe other updates to the forms, including new reporting boxes related to tips and overtime compensation. These mostly affect employers and payroll providers, and your accountant or payroll software will handle them.
Who Still Needs a Form 1099?
Whether you must file depends on four things: who you paid, what you paid for, how you paid, and how much. A simplified checklist:
- You paid for services in the course of your trade or business. Payments for personal services, such as a babysitter or home repair at your own house, do not count.
- The payee is generally not a corporation. Payments to sole proprietors, single-member LLCs and partnerships are the usual candidates. There are exceptions, including payments to attorneys, so ask your tax adviser.
- You paid $2,000 or more during 2026 for nonemployee compensation (Form 1099-NEC) or for rents, prizes and certain other payments (Form 1099-MISC).
- You did not pay by credit card, debit card or a third-party network such as PayPal. Those payments are generally reported by the payment processor on Form 1099-K, not by you.
Key Dates for the Forms You File in 2027
| Form | Recipient copy due | IRS due date |
|---|---|---|
| 1099-NEC | January 31, 2027 (falls on a Sunday, so February 1) | January 31, 2027 (February 1 because of the weekend) |
| 1099-MISC (paper) | January 31, 2027 (February 1) | February 28, 2027 (falls on a Sunday, so March 1) |
| 1099-MISC (electronic) | January 31, 2027 (February 1) | March 31, 2027 |
The IRS instructions also note that you must e-file if you file 10 or more information returns in total, counting all types together. Confirm each date in the current instructions before you file, because the IRS adjusts when due dates land on weekends or holidays.
A Year-End Checklist for Small Business Owners
- Collect a Form W-9 from every contractor. Do it before the first payment, not in January. Our guide to the Form W-9 explains what it contains, and when a W-9 is not required covers the exceptions.
- Total payments by payee for 2026. Pull your bookkeeping report for payments to contractors, filter out card and PayPal payments, and see who crosses $2,000.
- Check taxpayer identification numbers. The IRS instructions say you must backup withhold on reportable payments if a payee does not furnish a TIN. Ask your tax professional how that works for your business.
- Separate employees from contractors. A 1099 is only for genuine independent contractors. Misclassifying employees can create payroll tax problems.
- Update your bookkeeping system. Many accounting programs set the old $600 flag by default, so confirm that yours has been changed to $2,000 for 2026 payments.
- Keep a vendor file. Store the W-9, contract and invoices for each contractor for the period your adviser recommends.
What If You Paid a Contractor Less Than $2,000?
You are generally not required to file, but there is no penalty for being organized. Some owners decide to keep sending forms for smaller amounts for consistent records, and some payees ask for them. Whether you file or not, your contractor still has to report the income. If you are unsure, ask your accountant.
How This Connects to Your Other Year-End Tax Decisions
Contractor payments reduce your taxable profit, so they matter for planning. If you are weighing a large equipment purchase before December 31, read our guide to Section 179 vs bonus depreciation. If you are self-employed and still catching up on your own taxes, see our guide on what self-employed owners must do after filing an extension.
Frequently Asked Questions
What is the 1099-NEC threshold for 2026?
$2,000 for payments made in 2026, according to the IRS instructions. For 2025 payments, the threshold was still $600.
Do I need to send a 1099 for a $1,800 payment to a freelancer?
Not for 2026 payments under the new threshold, though the freelancer still owes tax on the income.
Will the $2,000 threshold change again?
The IRS says it may be adjusted for inflation beginning in calendar year 2027.
When is Form 1099-NEC due?
January 31 to both the IRS and the contractor. For payments made in 2026, January 31, 2027 is a Sunday, so the due date moves to the next business day.
Do I still need a W-9?
It is wise to collect one from every contractor before paying them, because it gives you the name and taxpayer identification number you need if the total ends up above the threshold.
Sources: IRS, Instructions for Forms 1099-MISC and 1099-NEC (threshold, due dates, backup withholding, e-filing rule and new boxes); IRS information on the One Big Beautiful Bill Act. The calendar dates for 2027 are our reading of the IRS weekend rule and should be confirmed in the current instructions. This guide is a summary, not tax advice.
