Quick answer: You file Form 1099-NEC when your business pays a non employee, such as a freelancer, contractor or attorney, for services. For payments made in 2026, the threshold rose from $600 to $2,000 per payee under the One Big Beautiful Bill Act. Forms for 2026 payments are due to the IRS and to each contractor by February 1, 2027.
Fewer contractors will need a form for 2026, but the rules on who counts, what to leave off and when to collect a W-9 have not changed. Here is what applies, in plain English.
What Form 1099-NEC reports
Form 1099-NEC (nonemployee compensation) tells the IRS how much you paid someone who is not your employee for work. The contractor uses it to report the income on their own return.
- Box 1a holds the total you paid for services, including parts or materials that were part of the job.
- New boxes for 2026 report qualified tips, which most small businesses leave blank. Overtime is not reported on a 1099-NEC; it goes on the employee's W-2.
- Box 4 shows any backup withholding.
- Boxes 5 to 7 show state withholding, if any.
Employees get a W-2 instead. A 1099 is only for people and businesses you do not put on payroll.
The new $2,000 threshold: which year uses which amount
| Payments made in | File a 1099-NEC when one payee gets | Forms due |
|---|---|---|
| 2025 | $600 or more | February 2, 2026 |
| 2026 | $2,000 or more | February 1, 2027 |
| 2027 and later | $2,000, adjusted for inflation | January 31 of the next year (or next business day) |
- The date you pay controls, not the invoice date. A December 2025 invoice paid in January 2026 counts toward 2026.
- Add up the whole year per payee. Five $500 payments to one designer total $2,500, so they need a form.
- The change also covers most 1099-MISC boxes, such as rent, and the backup withholding threshold.
Good to know: Under the threshold? You may still file a 1099 voluntarily, and you must file one for anyone you backup withheld from, whatever the amount.
Who gets a 1099-NEC?
| Payee type | 1099-NEC? |
|---|---|
| Individual or sole proprietor | Yes, at $2,000 or more |
| Single member LLC or LLC taxed as a partnership | Yes |
| Partnership | Yes |
| LLC taxed as an S corp or C corp, or any corporation | No, except attorneys |
| Attorney or law firm for legal services | Yes, even if incorporated |
Payments you leave off a 1099-NEC
- Payments by credit card, debit card, PayPal, Venmo or similar apps (reported on Form 1099-K by the processor)
- Products, inventory and supplies bought on their own, plus freight and storage
- Wages, bonuses and reimbursements to your own employees (those go on the W-2)
- Personal payments, like a contractor who painted your home
- Payments to tax exempt groups or government agencies
- Rent paid through a property manager or real estate agent
1099-NEC vs 1099-MISC: which form to use
| Payment | Form | 2026 threshold |
|---|---|---|
| Services by contractors, freelancers and consultants | 1099-NEC, box 1a | $2,000 |
| Attorney fees for legal services | 1099-NEC, box 1a | $2,000 |
| Office or equipment rent | 1099-MISC, box 1 | $2,000 |
| Prizes and awards to non employees | 1099-MISC, box 3 | $2,000 |
| Settlement money paid to an attorney | 1099-MISC, box 10 | $600 |
| Royalties | 1099-MISC, box 2 | $10 |
A simple test: if you paid someone to do work, it usually goes on a 1099-NEC. If you paid for the use of property, or paid other income that is not for services, it usually goes on a 1099-MISC.
Collect a W-9 before the first payment
Form W-9 gives you the contractor’s legal name, address, tax classification and taxpayer identification number. Ask for it before you pay, even if you think they will stay under $2,000.
- No W-9 or no number? You generally must withhold 24% backup withholding and send it to the IRS.
- The tax classification box tells you whether an LLC is taxed as a corporation and can skip the 1099.
- Store W-9s with the vendor in QuickBooks Online so the details carry into your 1099s.
Tip: Make the W-9 part of onboarding. Chasing missing forms in January is the main reason 1099s are filed late.
1099 deadlines for the 2027 filing season
- Dec 31, 2026Last day for payments to count toward 2026. Review vendor totals and missing W-9s now.
- Feb 1, 2027Form 1099-NEC due to the IRS and to each contractor. January 31 falls on a Sunday.
- Mar 1, 2027Paper Forms 1099-MISC due to the IRS. Contractor copies were due February 1.
- Mar 31, 2027Forms 1099-MISC due to the IRS if you file electronically.
- Aug 1, 2027After this date, the late penalty for each missing 1099 jumps to its highest regular level.
There is no automatic extension for the 1099-NEC. Every federal and Virginia date is also on our tax deadline calendar.
How to file Form 1099-NEC
- Review your vendor list and confirm totals and W-9 details.
- File with the IRS. You must file electronically if you have 10 or more information returns in total, including W-2s. The free IRS system is called IRIS. Paper filers must use the official red Copy A, not a printout.
- Send each contractor their copy by mail or, with their consent, electronically.
- Keep copies for at least four years.
Do you file 1099s with Virginia?
Generally only when the form shows Virginia income tax withheld, which is rare for contractors. Washington, DC and Maryland have their own rules, so check them if you pay workers there.
Penalties for late or incorrect 1099s
Errors like a wrong taxpayer number count too. If you spot a mistake, file a corrected form quickly to keep the penalty in the lowest tier.
Contractor or employee?
Sending a 1099 does not make someone a contractor. If you control how, when and where the work is done, the worker may legally be an employee.
Misclassifying a worker can lead to back payroll taxes, penalties and Virginia unemployment tax. If you are unsure, our payroll services team can review it, or read hiring your first employee in Virginia.
→Related guideQuickBooks Online Month End Close Checklist for Small BusinessesA monthly routine that keeps vendor totals and W-9s ready for January.1099-NEC FAQs
What is the 1099-NEC threshold for 2026?
For payments made in 2026, you file Form 1099-NEC when you pay one person or unincorporated business $2,000 or more for services during the year. For payments made in 2025, the threshold was $600. Starting in 2027 the $2,000 amount is scheduled to be adjusted for inflation.
I paid a 2025 invoice in January 2026. Which threshold applies?
Reporting follows the date you paid, not the invoice date. A payment made in January 2026 counts toward 2026, so the $2,000 threshold applies and it is reported on the 1099 due in early 2027.
Do I need to send a 1099-NEC to an LLC?
It depends on how the LLC is taxed. A single member LLC or an LLC taxed as a partnership generally gets a 1099. An LLC taxed as an S corp or C corp generally does not, unless it is a law firm. The W-9 tells you which one you have.
Do I send a 1099 if I paid a contractor through PayPal, Venmo or a credit card?
No. Payments by card or through a payment app are reported by the payment company on Form 1099-K, so you leave them off the 1099-NEC to avoid reporting the same money twice.
Do I need to file 1099s with Virginia?
Generally no. Virginia Tax requires 1099s only when the form shows Virginia income tax withheld. You still file every required 1099 with the IRS.
What happens if a contractor will not give me a W-9?
You are generally required to start backup withholding of 24% from reportable payments and send it to the IRS. That pressure usually gets the form returned quickly.
Do I send a 1099 to a contractor who lives outside the U.S.?
Usually not for work done entirely outside the U.S. by a foreign person. Ask for Form W-8BEN instead of a W-9 and keep it on file.
Does my landlord get a 1099-NEC?
No. Rent goes on Form 1099-MISC, and only if you paid $2,000 or more in 2026 to a landlord who is not a corporation. Rent paid to a property manager or real estate agent is generally not reported by you.
Can I file a 1099-NEC myself for free?
Yes. The IRS Information Returns Intake System (IRIS) lets small businesses file Forms 1099 online at no cost. You still need to send each contractor their copy.
Track it in QuickBooks all year
QuickBooks Online can flag contractors, store W-9 details and produce your 1099s in minutes, as long as payments are recorded correctly. As a Certified QuickBooks Online ProAdvisor in Ashburn, we set this up through our QuickBooks ProAdvisor and bookkeeping services, and file your 1099s each January.
This article is general information and not tax advice for your situation. Tax rules change, so talk with a qualified professional before making decisions.
