The 1099-NEC Threshold Is Now $2,000: A Small Business Guide to Filing 1099s (2026)

The 1099-NEC threshold sat at $600 from 1954 until this year — long enough that most small business owners assumed it was a law of nature. It isn't anymore. The One Big Beautiful Bill Act, signed on July 4, 2025, raised it to $2,000 for payments made on or after January 1, 2026, with inflation adjustments starting in 2027. The forms you file in early 2027 are the first ones the new figure applies to.

That is genuinely good news: fewer forms, fewer W-9 chases for the person who fixed one door in March. But a higher threshold doesn't change who is a contractor, what counts as a payment, or the deadline. This guide covers the new 1099-NEC threshold and everything around it — who gets a form, what counts toward the $2,000, the dates, and the year-round habit that makes January easy.

What Changed: The 1099-NEC Threshold, Old vs. New

The threshold is measured per payee, per calendar year, on the total paid. It isn't per invoice or per job. A designer who sends you four $600 invoices in 2026 has been paid $2,400 and gets a form. It's also measured on payment dates, not invoice dates: a bill dated December 2026 and paid in January 2027 counts toward 2027.

Who Needs a 1099-NEC?

Four conditions, all of which have to be true:

1. You paid for services in the course of your business. Personal payments, like a painter for your own house, don't count.
2. The payee isn't your employee. Employees get a W-2 through payroll. If you're unsure which side of the line someone sits on, that question matters more than the form; misclassification is the expensive mistake here.
3. The payee isn't a corporation, with exceptions noted below.
4. You paid them $2,000 or more during 2026 by a method that counts.

Do you need to send a 1099 to an LLC?

It depends on how the LLC is taxed, which is exactly what the W-9 tells you. A single-member LLC taxed as a sole proprietorship is treated as the owner and generally gets a 1099-NEC. An LLC that has elected S-corporation or C-corporation treatment generally doesn't. Don't guess from the name; read box 3 of the W-9.

What about corporations?

Payments to corporations are generally exempt, with two exceptions worth knowing: fees for legal services and medical and health care payments are reportable even when the payee is incorporated. Your law firm gets a 1099-NEC if you paid it $2,000 or more in fees, whatever its entity type.

Do product purchases count?

No. The 1099-NEC is for services. Buying inventory, supplies, or equipment from a sole proprietor isn't reportable. If an invoice mixes labor and materials, such as a contractor who supplies and installs a fixture, the materials incidental to the service are generally included in the reportable total.

What Counts Toward the $2,000 (and What Doesn't)

This is where most 1099 errors actually come from. The question isn't "how much did this vendor bill us?" It's "how much did we pay them, and how?"

• Counts: checks, cash, ACH and wire transfers, and payments recorded directly against the vendor without going through a bill, such as a check written on the spot or a commission paid by journal entry.
• Doesn't count: payments by credit card, debit card, or a payment platform like PayPal. The processor reports those on Form 1099-K. Including them on your 1099-NEC means the contractor's income gets reported twice.
• Doesn't count: reimbursed expenses that the contractor accounted for to you, and payments to employees.

The quiet trap is a contractor who exists twice in your vendor list, as "Maria Lopez" and "Lopez Design LLC", or a duplicate created by a data import. Split across two records, a contractor paid $2,600 can look like two payees at $1,300 each, both under the threshold. The IRS sees one taxpayer ID and one person. If two vendor records share a TIN, their totals belong on one form.

The threshold decides whether you file a form. It doesn't decide whether the money is income. A contractor paid $1,500 still owes tax on $1,500.

The 2026 Filing Calendar

Form 1099-NEC is normally due January 31, to both the contractor and the IRS on the same day. Because January 31, 2027 falls on a Sunday, the deadline for 2026 forms is Monday, February 1, 2027. Unlike most tax deadlines, there is no automatic extension, and penalties are charged per form and climb the later you file.

Since 2024, a business filing 10 or more information returns in total must e-file them. That count includes W-2s, so a company with six employees and four qualifying contractors is already over the line. The IRS offers its free IRIS portal for e-filing, and authorized e-file providers handle it for a per-form fee.

What if a contractor won't give you a W-9?

Without a taxpayer ID, you're generally required to start backup withholding at 24% on reportable payments and send it to the IRS. If you backup-withhold anything for a payee, you file a 1099 for them regardless of the total. The practical answer is simple: no W-9, no first payment. Contractors who work with businesses regularly expect the request.

A Year-Round 1099 Routine That Takes Minutes

Every bad January follows the same pattern: you sit with twelve months of bank statements trying to work out who was a contractor, chasing W-9s from people you last spoke to in April. The fix is four small habits:

1. Collect a W-9 before the first payment. Record the TIN, the tax classification, and the date it was received on the vendor record.
2. Flag 1099 vendors when you set them up. Not in December. The flag is what lets your books total them automatically.
3. Pay through your books, not around them. A payment that lives only in the bank feed and was never tied to the vendor won't be in the vendor's total. Our accounts payable process guide covers the workflow that keeps every payment attached to its payee.
4. Check the totals in October and again at year end. Anyone approaching $2,000 without a W-9 on file is the person to chase now, while they still answer email. Adding a quick 1099 review to your month-end close checklist in Q4 is the easiest way to make it stick.

How BizBooks Pro Handles 1099 Contractors

BizBooks Pro has a dedicated 1099 Center. On each vendor you mark 1099 eligibility and record the TIN, the TIN type, and whether and when a W-9 was received. From then on the software totals every contractor's payments for the tax year. That includes bills paid through Accounts Payable and checks, expenses, and journal entries paid directly to the vendor. Card payments are excluded deliberately, because they belong on the processor's 1099-K.

The dashboard shows how many vendors are over the reporting threshold, who's missing a TIN, and who still owes you a W-9, so the October check above is a single screen. If the same contractor exists under two vendor records, BizBooks Pro flags records that share a tax ID or look like the same name, and lets you link them so their payments total onto one form, without merging or deleting anything. You can then generate print-ready 1099-NEC forms, or e-file through TaxBandits with your own TaxBandits account. It all runs against a database on your own computer, so your contractors' Social Security and EIN numbers stay on hardware you control.

The Bottom Line

The new $2,000 1099-NEC threshold means fewer forms for most small businesses, but the work that makes filing painless hasn't changed: get a W-9 before the first payment, flag contractors when you set them up, record every payment against the vendor, and leave card payments to the processors. Do that and the February 1, 2027 deadline is a fifteen-minute job. Skip it and it's a weekend with your bank statements.

Frequently Asked Questions

What is the 1099-NEC threshold for 2026?

For payments made on or after January 1, 2026, a business must file Form 1099-NEC for a contractor it paid $2,000 or more during the year for services. The threshold was $600 through tax year 2025. The change comes from the One Big Beautiful Bill Act, signed July 4, 2025, and the $2,000 figure is indexed for inflation from 2027.

When are 2026 Form 1099-NEC filings due?

Form 1099-NEC is due to both the contractor and the IRS by January 31 of the following year. Because January 31, 2027 falls on a Sunday, forms covering 2026 payments are due Monday, February 1, 2027. There's no automatic extension for 1099-NEC, so plan to have W-9s and payment totals ready in early January.

Do I need to send a 1099 to an LLC or a corporation?

It depends on how the business is taxed, which is why you collect a Form W-9. A single-member LLC taxed as a sole proprietorship generally gets a 1099-NEC. An LLC that has elected to be taxed as an S corporation or C corporation, and corporations generally, do not — with exceptions for payments for legal services and for medical and health care payments, which are reportable even to corporations.

Do payments by credit card or PayPal count toward the 1099-NEC threshold?

No. Payments you make by credit card, debit card, or a third-party payment network are reported by the card processor or payment platform on Form 1099-K, not by you on Form 1099-NEC. Count only what you paid by check, cash, ACH, or direct bank transfer when deciding whether a contractor crossed the threshold.

What happens if a contractor won't give me a W-9?

If a payee doesn't provide a taxpayer identification number, you're generally required to begin backup withholding at 24% on reportable payments and remit it to the IRS. If you backup-withhold any amount for a payee, you file a 1099 for that payee even if the total paid was below the $2,000 threshold. Collecting the W-9 before the first payment avoids the problem entirely.

Does a contractor paid under $2,000 still owe tax?

Yes. The threshold only decides whether the payer must file an information return. It doesn't change what counts as taxable income. A contractor who earned $1,500 from you and received no 1099-NEC must still report that income on their own tax return.

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