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Key takeaways
- For payments made after December 31, 2025, the reporting threshold for Forms 1099-NEC and 1099-MISC rises from $600 to $2,000.
- The threshold will be adjusted for inflation starting after 2026.
- You still need a W-9 from every contractor, and recipients still owe tax on every dollar.
- 1099-NEC is due to both the contractor and the IRS by January 31.
If your business pays independent contractors, you've probably spent a January chasing W-9s and filing 1099s for people you paid $650. The 2025 tax law gives you some relief: the dollar threshold for most 1099 reporting is more than tripling.
What changed
Since the 1950s, a business generally had to file an information return when it paid a non-employee $600 or more in a year. For payments made in calendar year 2026 and later, that threshold is $2,000 for:
- Form 1099-NEC — non-employee compensation, such as payments to freelancers, consultants and contractors for services.
- Form 1099-MISC — most other reportable payments, such as rents and prizes. (Some categories, such as royalties, keep their own separate thresholds.)
After 2026, the $2,000 amount will be indexed to inflation. The threshold for backup withholding on these payments moves in step.
The first forms affected are the ones you'll file in January 2027, for payments made during 2026. Forms filed in January 2026 still used the $600 threshold for 2025 payments.
Who files what
| You paid… | By… | Form |
|---|---|---|
| $2,000+ for services to an individual or LLC | Check, ACH or wire | 1099-NEC from you |
| $2,000+ in rent or other reportable payments | Check, ACH or wire | 1099-MISC from you |
| Any amount | Credit card or payment app | Generally none from you — the processor may issue a 1099-K |
| Any amount for services to a corporation | Any method | Generally none (exceptions apply, such as payments to attorneys) |
The corporation exemption doesn't cover legal services — payments to attorneys generally remain reportable even if the firm is incorporated.
What doesn't change
Income is still taxable. If you're the contractor, not receiving a 1099 doesn't make income non-taxable. Every dollar you earn belongs on your return. The IRS also gets data from banks and payment processors, so the absence of a form isn't the absence of a record.
You still need W-9s. Collect a Form W-9 before you pay any new contractor, even for a small first project. You won't always know at the start whether a relationship will cross $2,000 by December, and asking for a W-9 in January is much harder than asking on day one.
Your deduction still needs support. Filing or not filing a 1099 doesn't affect whether the payment is deductible — invoices, contracts and proof of payment do.
Worker classification still matters. A higher threshold doesn't change whether someone should really be treated as an employee. Misclassification carries its own payroll-tax consequences.
Deadlines and e-filing
- 1099-NEC: due to the recipient and the IRS by January 31.
- 1099-MISC: generally due to the recipient by January 31, and to the IRS by February 28 on paper or March 31 if filed electronically.
- E-filing: if you file 10 or more information returns of any type in a year (counted together), you must file them electronically. The IRS offers a free portal, IRIS, for this.
- States: many states have their own 1099 filing requirements and may or may not follow the new federal threshold. Check each state where you pay contractors.
Your checklist for 2026 payments
- Keep a vendor list with W-9s on file for every contractor you pay.
- Tag each vendor's payment method in your books so card and app payments are excluded.
- In early December, run a report of vendors approaching $2,000.
- File 1099-NECs by January 31 and keep copies with your tax records.
Our Ledger Sync service tracks contractor totals and W-9 status throughout the year, so January is a review, not a project.
This article is general information, current as of September 2026, and isn't tax advice for your situation. Figures are federal unless noted, and indexed amounts change each year — confirm current numbers with your tax pro before acting.