United States / Guides / 1099-NEC: who gets one, and the threshold that just changed
United States · guide1099-NEC: who gets one, and the threshold that just changed
The short answer
A business generally issues Form 1099-NEC to any non-employee it paid $2,000 or more during the year for services performed in the course of that business — this threshold applies to payments made starting January 1, 2026, up from the $600 threshold that applied through 2025. The recipient must be a person, partnership, or LLC taxed as one of those (not, with narrow exceptions, a corporation), and payment must have been made in cash, check, ACH, or similar means outside a payment-card network. Attorneys are the standing exception: fees paid to a law firm for services go on 1099-NEC at the same $2,000 test, but gross settlement proceeds paid to an attorney still trigger 1099-MISC at the older $600 level regardless of who the underlying payee is.
Key facts — verified dates on each
What changed, and when it takes effect
Form 1099-NEC reports nonemployee compensation — payments to independent contractors, freelancers, and other non-employees for services. Since the form was reintroduced for tax year 2020, the reporting threshold had stayed at $600, the same figure that has applied to information returns since the 1950s tax code.
The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, raised that threshold to $2,000 for both Form 1099-NEC and Form 1099-MISC. The change applies to payments made in calendar year 2026 and later; the 2025 tax year, filed in early 2026, still uses the $600 threshold. Starting with tax year 2027, the $2,000 figure itself becomes inflation-indexed, adjusted annually and rounded to the nearest $100.
This means most businesses will file this using the old $600 rule one more time (for 2025 payments, due January 2026) before the new $2,000 rule applies to 2026 payments, filed in January 2027. Payroll and AP systems that hard-coded $600 as a filing trigger need an update before year-end 2026, not before this January.
Who counts as a reportable payee
The threshold test is only the first filter. A payment is reportable on 1099-NEC when all of the following are true: the recipient is not your employee, the payment was for services performed in the course of your trade or business (not a personal payment), the recipient is not — with exceptions below — a C-corporation or S-corporation, and the payment method was cash-equivalent rather than a payment card or third-party network transaction.
Sole proprietors, partnerships, and single-member LLCs that have not elected corporate tax treatment are reportable. LLCs taxed as S-corps or C-corps generally are not, which is why the W-9 on file — not the business name — is what actually controls the filing decision.
- Reportable: sole proprietors, individuals, partnerships, LLCs taxed as disregarded entities or partnerships
- Generally exempt: C-corporations and S-corporations (check the W-9 box, not the "Inc." in the name)
- Always reportable regardless of corporate status: payments to attorneys for legal services
- Not reportable on 1099-NEC: payments made by credit card, debit card, or a third-party network like PayPal Goods & Services — those are the payment settlement entity's responsibility under Form 1099-K
The W-9 discipline that makes the rest work
Form W-9 is the mechanism, not a formality: it is how a business learns a payee's tax classification, TIN, and backup-withholding status before the first payment goes out, not after a 1099 deadline is bearing down. Collecting it before payment, rather than at year-end, is the single habit that prevents most filing scrambles.
If a payee refuses to provide a TIN, or the TIN the IRS matches back as incorrect, backup withholding applies to future payments at the statutory flat rate, and the amount withheld must be deposited and reported — a mechanism worth flagging to a CPA rather than handling ad hoc, since the withholding and deposit rules interact with the business's own federal deposit schedule.
A signed W-9 does not expire, but a business should refresh it if an EIN changes, an entity converts (e.g., sole prop to LLC), or years pass with no recent copy on file — the TIN Matching consequences land on the payer, not the payee, if a stale form turns out to be wrong.
Where businesses miss a required 1099-NEC
A handful of payment types get reported incorrectly or missed entirely, and they recur every filing season regardless of business size.
- Attorney fees for services: reportable on 1099-NEC at the same threshold as any other contractor, even when the law firm is structured as a corporation — the corporate exemption does not apply to legal fees
- Attorney gross proceeds (settlements): a different box, a different form (1099-MISC Box 10), and a threshold that OBBBA did not raise — it stays at $600, so this line item needs separate tracking from ordinary legal-fee payments
- Rent paid to an individual landlord: reported on 1099-MISC, not 1099-NEC, but subject to its own threshold change under the same OBBBA provision — confirm the applicable box and figure for the filing year rather than assuming NEC and MISC always move together
- Reimbursed expenses bundled into a contractor invoice: if the invoice does not separately state reimbursed expenses with receipts, the full amount — including the pass-through cost — is generally treated as compensation for threshold purposes
- Payments split across multiple invoices to stay under the threshold: the test is the payee's cumulative total for the calendar year, not any single invoice or check
Deadlines and where the mechanism, not advice, applies
Form 1099-NEC has a single filing deadline for both the recipient copy and the IRS copy: January 31 of the year following payment, whether filed on paper or electronically — there is no extended electronic-filing date the way there is for some other information returns.
A business that determines a payment is reportable, and needs to confirm a payee's classification, a settlement structuring question, or a withholding calculation, is in CPA or counsel territory rather than a mechanical filing question — the threshold and payee tests above establish whether a form is due; they do not resolve close calls on classification or nexus, which the taxpayer's adviser is positioned to determine.
The figures, and when we checked them
These numbers change by year or by notification. Each one shows the date we last verified it against the source — if that date looks old, check the source before relying on it.
Questions on this
Does the $2,000 threshold apply to 1099s filed in January 2026?
No. Payments made during 2025 are reported in January 2026 under the prior $600 threshold. The $2,000 threshold applies to payments made in 2026, which are reported in January 2027.
Do I need a 1099-NEC for a contractor I paid $1,800 in 2026?
Under the $2,000 threshold that applies to 2026 payments, a total below $2,000 to that payee for the year generally does not require a 1099-NEC. The payee still owes tax on that income regardless of whether a form was issued.
Do corporations ever need a 1099-NEC?
Payments to C-corporations and S-corporations are generally exempt from 1099-NEC reporting, with a standing exception for attorneys: fees paid to a law firm for legal services are reportable even if the firm is incorporated.
I paid a contractor through PayPal. Do I still file a 1099-NEC?
Payments made through a third-party payment network are excluded from 1099-NEC and instead fall under Form 1099-K, which is filed by the payment platform, not the business making the payment. Reporting the same payment on both forms would double-count it.
What happens if a contractor will not fill out a W-9?
A business can still be required to make the payment, but a missing or unverifiable TIN can trigger backup withholding on that and future payments to the same payee. The specific rate and deposit mechanics are worth confirming with a CPA before the first affected payment goes out.
Is the $2,000 threshold the same for 1099-MISC?
For most 1099-MISC boxes, yes — OBBBA raised the $600 threshold to $2,000 for 1099-MISC as well as 1099-NEC, effective for 2026 payments. The gross-proceeds-to-attorneys box (Box 10) is the documented exception, still at $600.
Does rent I pay a landlord count toward the 1099-NEC threshold?
Rent is not a services payment, so it is reported on Form 1099-MISC rather than 1099-NEC. It moved to the same $2,000 threshold as 1099-NEC starting with 2026 payments, but it is tracked and filed separately.
Can I combine several small invoices to avoid filing?
The threshold applies to the payee's cumulative total for the calendar year across all payments, not to any single invoice. Splitting payments does not change the filing determination.
When is Form 1099-NEC due?
Both the copy sent to the recipient and the copy filed with the IRS are due January 31 of the year following the payment, regardless of whether the business files on paper or electronically.
Will the threshold keep changing every year?
Starting with tax year 2027, the $2,000 figure is scheduled to adjust for inflation annually, rounded to the nearest $100. The exact adjusted figure for any given year should be confirmed on the current IRS instructions rather than assumed from a prior year.
Primary sources
- IRS — Instructions for Forms 1099-MISC and 1099-NEC
- IRS — About Form 1099-NEC, Nonemployee Compensation
- Cornell Law School LII — 26 U.S. Code § 6041, Information at source (threshold and inflation-adjustment text as amended)
Last reviewed 2026-08-14. Statutes and schedules change — the sources above are authoritative, this page is orientation.
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