1099-NEC Filing Rules: Who Gets One and the New Threshold
Which payments trigger a 1099-NEC, the $2,000 threshold that started in 2026, deadlines, and the exceptions that trip up small businesses.
Reviewed by the Fairlight Accounting cross-border tax team — U.S. & Canadian Tax Desks
Form 1099-NEC reports payments a business makes for services to someone who is not its employee — independent contractors, freelancers, and many attorneys. For payments made in 2026, the reporting threshold is $2,000 per payee per year, up from $600, with inflation indexing from 2027. The form is due to the recipient and the IRS by January 31.
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Who must file a 1099-NEC?
A business must file when all of these are true:
- The payment was made in the course of your trade or business (personal payments do not count).
- It was for services, not goods.
- It went to an individual, partnership, LLC taxed as a partnership or sole proprietorship, or estate.
- Total payments to that payee for the year reached the threshold.
What changed with the threshold?
The 2025 tax law raised the reporting threshold for both Form 1099-NEC and Form 1099-MISC from $600 to $2,000 for payments made after December 31, 2025, with inflation adjustments beginning after 2026. Payments made during 2025 and reported in January 2026 still used the $600 threshold. A few Form 1099-MISC items keep their own thresholds — gross proceeds paid to an attorney stay at $600, and royalties at $10.
| Payment | Form | Threshold (payments in 2026) |
|---|---|---|
| Contractor services | 1099-NEC | $2,000 |
| Attorney fees for services | 1099-NEC | $2,000 (no corporate exemption) |
| Rent paid to a non-corporate landlord | 1099-MISC | $2,000 |
| Gross proceeds paid to an attorney (settlements) | 1099-MISC | $600 (unchanged; no corporate exemption) |
| Payments made by credit card or payment app | None from you | Reported by the processor on 1099-K |
Who is exempt?
- Corporations, including LLCs taxed as C or S corporations — except attorneys and payments for medical and health care services.
- Payments by credit card, debit card, or third-party networks such as PayPal business payments — the processor reports these on Form 1099-K.
- Employees — their pay goes on Form W-2.
- Payments for merchandise, freight, storage, and similar non-service items.
How do you collect the information?
Request Form W-9 before making the first payment. It gives you the payee's legal name, tax classification, and taxpayer identification number. If a payee refuses or gives an obviously wrong number, you must begin backup withholding at 24 percent of payments and send it to the IRS.
What are the deadlines and penalties?
Form 1099-NEC is due to both the payee and the IRS by January 31 — there is no later IRS deadline for this form. Businesses filing 10 or more information returns in total must file electronically; the IRS's free Information Returns Intake System is one option. Penalties apply per form and rise the later you file, with higher amounts for intentional disregard.
Frequently asked questions
Do I issue a 1099-NEC to an LLC?
It depends on how the LLC is taxed. A single-member LLC taxed as a sole proprietorship or a multi-member LLC taxed as a partnership gets one; an LLC that elected corporate taxation generally does not. The W-9 tells you.
Does a foreign contractor get a 1099-NEC?
No. A foreign person working outside the U.S. provides Form W-8BEN instead, and you generally do not report payments for services performed abroad on a 1099.
What if I paid a contractor partly by check and partly by card?
Only the check or bank-transfer portion counts toward your 1099-NEC threshold. The card portion is the processor's to report.
What if I find a missed 1099 after January 31?
File it as soon as possible. Penalties are lower the sooner a late form is filed.
Official sources
The IRS explains: “Section 6071(c) requires you to file Form 1099-NEC on or before January 31, using either paper or electronic filing procedures.” — Internal Revenue Service, Instructions for Forms 1099-MISC and 1099-NEC (12/2026), https://www.irs.gov/instructions/i1099mec
The IRS explains: “There are situations when the payer is required to withhold at the current rate of 24 percent. This 24 percent tax is taken from any future payments to ensure the IRS receives the tax due on this income.” — Internal Revenue Service, Backup withholding, https://www.irs.gov/businesses/small-businesses-self-employed/backup-withholding
Next step
Fairlight Accounting handles U.S. domestic, cross-border (U.S.–Canada), and international tax returns, plus bookkeeping, payroll, and CFO advisory. Our U.S. Tax Desk collects W-9s through the year and files your 1099s before the January 31 deadline. See pricing or book a free fit call.
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