Quick answer: A business generally must issue Form 1099-NEC to an unincorporated contractor it paid for services above the federal reporting threshold during the year, and Form 1099-MISC for items such as rent paid in the course of business. For payments made in 2025 the threshold was $600; for payments made in 2026 and later it rises to $2,000, with inflation adjustments after that. Form 1099-NEC is due to both the recipient and the IRS by January 31.
Every January, small business owners call us with the same questions: who needs a 1099, which form, and by when. The rules are not hard once you see the pattern, but there are enough exceptions to trip people up. And for 2026 payments, the threshold itself has changed, which is welcome news for many small businesses.
Which payments need a 1099?
The two forms most small businesses deal with are:
- Form 1099-NEC (Nonemployee Compensation): payments for services by someone who is not your employee, such as a freelance designer, a subcontractor, a consultant, or an attorney.
- Form 1099-MISC (Miscellaneous Information): other business payments, most commonly rent paid for office or equipment space, and certain prizes, awards, and royalties.
The payment must be made in the course of your trade or business. Personal payments, like hiring a contractor to redo your own kitchen, do not require a 1099. Landlords who are operating a rental business should pay attention here, since payments to repair contractors may count.
Payments to employees are reported on Form W-2, never on a 1099. If you are not sure which a worker is, read our article on employee or independent contractor first.
The reporting threshold changed for 2026
For many years, the threshold for Forms 1099-NEC and most 1099-MISC payments was $600 per payee per year. Federal tax legislation enacted in 2025 raised that threshold to $2,000 for payments made after December 31, 2025, with inflation adjustments beginning in later years.
What that means in practice:
- 1099s filed in early 2026 (for 2025 payments) still used the $600 threshold.
- 1099s filed in early 2027 (for 2026 payments) use the new $2,000 threshold.
- Some categories have their own thresholds. Royalties, for example, are reported at a much lower amount. Check the current IRS instructions for Forms 1099-MISC and 1099-NEC each year.
A higher threshold means fewer forms, not less income. Contractors still owe tax on everything they earn, whether or not they receive a 1099. Also note that the separate Form 1099-K, which payment apps and card processors issue, has its own rules and threshold.
Who does not get a 1099?
Several kinds of payees are generally exempt:
- Corporations, including S corporations, for most service payments. Important exceptions: payments to attorneys and certain medical and health care payments are reportable even when the payee is a corporation.
- Payments made by credit card, debit card, or a payment app such as PayPal. Those are reported by the payment processor on Form 1099-K, so you do not issue a 1099-NEC for them.
- Payments for merchandise, freight, storage, and similar items, as opposed to services.
- Employees, whose wages go on a W-2.
LLCs are a common point of confusion. An LLC's status depends on how it is taxed. A single-member LLC or one taxed as a partnership generally gets a 1099; an LLC that elected to be taxed as a corporation generally does not. The W-9 tells you which.
Collect a W-9 before you pay
The easiest way to stay out of trouble is to get a completed Form W-9 from every vendor before you issue the first payment. The W-9 gives you the vendor's legal name, taxpayer identification number, and tax classification, which tells you whether a 1099 is required.
If a vendor will not provide a taxpayer identification number, you may be required to withhold backup withholding from payments. Asking in January, after you have already paid someone, is much harder than asking up front.
When are 1099s due?
The main deadlines are:
- Form 1099-NEC: to the recipient and to the IRS by January 31.
- Form 1099-MISC: to the recipient by January 31 (some boxes have a mid-February date), and to the IRS by the end of February if filed on paper or by March 31 if filed electronically.
When a deadline falls on a weekend or holiday, it moves to the next business day. Late or incorrect forms carry penalties per form, and they increase the later you file.
How to file
The IRS now requires electronic filing for most businesses that file 10 or more information returns in a year, counting W-2s and 1099s together. You can file through the IRS's free online portal, through your accounting or payroll software, or through your accountant.
New York does not generally require a separate state copy of Form 1099-NEC from most businesses, but it does receive federal information returns through data-sharing arrangements. If you withheld New York tax on any payment, there are additional state reporting requirements; check tax.ny.gov for details.
A practical year-end routine:
- In November, run a report of payments by vendor for the year.
- Flag every vendor paid for services by check, ACH, or cash above the threshold.
- Confirm you have a current W-9 on file for each.
- Prepare and send forms in mid-January, well before the deadline.
Frequently asked questions
Do I need to send a 1099 to an LLC?
Usually yes, unless the LLC has elected to be taxed as a corporation. A single-member LLC or one taxed as a partnership generally receives a 1099-NEC for services. The vendor's W-9 shows its tax classification.
What is the 1099 threshold for 2026?
For payments made in 2026, the threshold for most Form 1099-NEC and 1099-MISC payments is $2,000 per payee, up from $600. The amount is scheduled to be adjusted for inflation in later years, so check the IRS instructions each year.
Do I send a 1099 if I paid a contractor through PayPal or a credit card?
Generally no. Payments made by card or through a payment app are reported by the payment processor on Form 1099-K, so you do not also issue a 1099-NEC for those amounts. Payments by check, ACH, or cash still count toward your 1099 reporting.
What happens if I miss the January 31 deadline?
The IRS charges a penalty for each late form, and the amount increases the longer you wait. File as soon as possible to keep the penalty at the lowest tier. If you missed forms entirely, we can help you catch up, and our bookkeeping and payroll services can handle 1099s for you each year.
This article is general information for 2026, not tax or legal advice for your situation. Tax rules and figures change; confirm current amounts with the IRS, New York State, or your accountant before acting.
Related service: Bookkeeping & Payroll