November 2026 · Taxes, Small Business, Bookkeeping

Who Gets a Form 1099 for 2026: The New $2,000 Threshold

Contractors paid in 2026 need a 1099 only at $2,000, the forms are due February 1, and the W-9s behind them are easiest to collect in November

Starting with payments made in 2026, a business owes a contractor a Form 1099-NEC only once that contractor's total for the year reaches $2,000, up from $600.[1] The forms are due February 1, 2027, and each one needs a Form W-9 from the person paid, which is why the work starts in November.

Here is where each kind of payment lands for 2026:[2]

Payment	Form and threshold
Contractors and other services	1099-NEC at $2,000
Rent, prizes, and medical payments	1099-MISC at $2,000
Attorney gross proceeds	1099-MISC at $600
Royalties	1099-MISC at $10
Card and payment-app payments	None from you; the processor files a 1099-K[3]

What changed for 2026

The One Big Beautiful Bill Act (OBBBA) raised the threshold for payments made after December 31, 2025, so the forms filed this past January, for 2025 payments, still used $600.[1] The OBBBA post summarized the change, and the January checklist flagged it a year ahead.

The $2,000 figure is fixed for 2026 only. Starting in 2027, it adjusts for inflation each year, rounded to the nearest $100.[1]

The threshold is counted per payee, across the calendar year, in any number of payments.[2] A sub paid $500 a month from September through December reaches $2,000 with the fourth check, and that contractor gets a form.

Who gets a 1099-NEC

A payment goes on Form 1099-NEC, the form for nonemployee compensation, when all four of these are true:[2]

The person paid is not your employee
The payment is for services, made in the course of your trade or business
The payee is an individual, a partnership, an estate, or, in a few cases, a corporation
Payments to that payee total $2,000 or more for the year

Beyond that, the answer depends on how the payee is set up:[2]

Sole proprietors: yes, including a self-employed person working under their own name.
LLCs: yes, unless the LLC is taxed as a C or S corporation, which the payee states on the W-9.
Partnerships: yes, including LLCs with more than one owner that are taxed as partnerships.
Corporations: generally no, whether C or S. Attorneys and medical providers are the exceptions, and their payments are reported even when the payee is incorporated.
Attorneys: always, incorporated or not. Fees for legal services go on the 1099-NEC at $2,000, while gross proceeds, such as a settlement paid through the attorney, go on Form 1099-MISC at $600.
Employees: never, because their pay goes on the W-2. A worker paid on a 1099 who is really an employee is the misclassification problem, and the threshold does not change it.

Payments for merchandise, freight, and storage never get a 1099, whoever the payee is.[2]

Subcontractors who supply materials

When a sub supplies parts or materials as an incidental part of doing the work, the 1099 reports the whole payment, labor and materials together.[2] Incidental means the materials come with the job, the way parts come with an auto repair, which is the IRS's own example.

That can push a sub over the line. An electrician billed $1,400 for labor and $800 for the wire and fixtures installed on the job was paid $2,200, so the 1099 shows $2,200, even though the labor alone fell short of $2,000.

A pure supply purchase, such as lumber from the yard, is merchandise and gets no 1099. A contract that is mostly materials with a little labor falls between the two, and the instructions do not address it, so decide how to report those contracts before January rather than at the deadline.

The other 1099-MISC thresholds

Most 1099-MISC categories moved to $2,000 as well: rents, prizes and awards, other income, and medical and health care payments.[2] Three stayed where they were:

Royalties, reported at $10
Gross proceeds paid to an attorney, reported at $600
Sales of $5,000 or more in consumer products to a buyer for resale

Rent paid to a real estate agent or property manager is not reported by the tenant; the agent reports it when paying it over to the owner.[2]

Card and app payments go on a different form

Pay a contractor by credit card, debit card, or through a payment app, and the card processor or app reports the payment on Form 1099-K, so it stays off your 1099-NEC.[2] That leaves checks, cash, and direct bank transfers as the payments that count toward the $2,000.

The processor's own threshold moved back as well. A 1099-K is required only when a payee receives more than $20,000 across more than 200 transactions in the year, and OBBBA restored that rule retroactively, canceling the scheduled drop to $600.[3]

Collect W-9s now

Each 1099 needs the payee's legal name and taxpayer identification number (TIN), meaning a Social Security number or an employer identification number, and the W-9 is how a payee certifies both.[4] The construction post makes the case for collecting it before the first check, and for 2026 payments, the next best time is now.

Collect one from every contractor, not only the ones already past $2,000. A sub at $1,200 in November can cross the line in December, and the W-9 also shows whether the payee is a corporation that needs no form at all.

Backup withholding

Backup withholding, the federal tax a payer must hold back from a payee who has not provided a TIN, follows the same $2,000 line.[1] Once a payee's payments for the year reach it with no TIN on file, you must withhold 24 percent of each payment and report it on Form 945.[4]

Contractor pay gets no grace period, because the 60-day window for a payee awaiting a TIN applies only to interest and dividends.[4] Any payment with tax withheld gets a 1099, whatever the amount.[2]

Withholding also starts when the IRS notifies you that a name and TIN on a filed 1099 do not match. The IRS TIN Matching program checks each name and number before you file, through an IRS e-Services account.[5]

Filing by February 1, 2027

The 1099-NEC is due January 31, to both the contractor and the IRS. In 2027, January 31 falls on a Sunday, so the deadline is Monday, February 1.[4]

There is no automatic extension for the 1099-NEC.[4] Form 8809 can request more time only in narrow hardship cases, so plan on February 1.

A business filing 10 or more information returns in total, counting W-2s and every type of 1099 together, must file them electronically.[4] For forms filed in 2027, the only electronic route is the IRS's Information Returns Intake System (IRIS), because the older Filing Information Returns Electronically (FIRE) system shuts down in 2026.[4]

IRIS has a free portal for filing directly, which requires a transmitter control code (TCC).[6] A typical TCC application takes up to 45 business days to process, so a business new to e-filing should apply this month.[4] Businesses that file through payroll or 1099 software use the provider's access instead.

What late or missing forms cost

For forms due in 2027, each late or incorrect 1099 is penalized on a sliding scale:[7]

$60 per form, if filed correctly within 30 days of the deadline
$130 per form, if filed correctly by August 1
$340 per form after August 1, or if never filed

A form never filed is penalized twice, once for the IRS copy and once for the contractor's copy. Skipping the forms on purpose costs at least $690 per form, with no annual cap.

The Arizona side

The Arizona Department of Revenue (ADOR) wants a 1099 only when it reports Arizona income tax withheld, so a contractor paid without Arizona withholding needs no Arizona filing.[8]

When Arizona tax was withheld, the 1099s go to ADOR with the annual withholding reconciliation, Form A1-R, due January 31.[8]

The bottom line

For 2026 payments, a contractor needs a 1099-NEC at $2,000 for the year, with card payments left out and materials supplied on the job left in. Collect a W-9 from every contractor this month and check the names and numbers, and February 1 becomes a matter of reporting what the books already show.

If 2026's payments are not yet recorded by payee, catch-up bookkeeping in November leaves time to collect the W-9s before the deadline.