The threshold that decides whether you owe someone a 1099 has moved for the first time since 1954. Payments made in 2026 are reportable at $2,000, up from $600.
That single change takes a large number of small contractor payments out of the system.
Everything else works as it did. You owe a 1099 to unincorporated service providers paid above the threshold, the NEC and the MISC are the two forms a normal business issues, and recipient copies are due 31 January.
TL;DR
- The threshold moved: $600 became $2,000 for payments made in 2026, under the One Big Beautiful Bill, and it indexes for inflation from 2027.
- Who gets one: unincorporated service providers you paid above the threshold, with corporations generally excluded apart from legal and medical payments.
- Which form: 1099-NEC for contractor work, 1099-MISC for rents and royalties, 1099-K from payment platforms above $20,000 and more than 200 transactions.
- Deadlines differ by form: NEC is 31 January to everyone, MISC is 31 January to the recipient and 28 February or 31 March to the IRS.
- Ten or more returns means electronic: and the transmitter code that allows it can take weeks to obtain.
- The work happens in December: count your total information returns and get the transmitter code applied for, because neither can be compressed once January starts. Late filing runs $60 to $340 per form.
- Errors are fixed, not refiled: a new 1099 marked corrected does it, and an error caught within 30 days sits in the $60 band instead of $340.
What Changed for 2026
The One Big Beautiful Bill raised the general reporting threshold from $600 to $2,000 for payments made after 31 December 2025 (the change sits in section 6041(a)). From 2027 the figure adjusts for inflation.
That $600 figure had stood since 1954. Seventy years of inflation had turned it into a threshold that captured almost every freelance invoice, which is what the increase addresses.
| Payment type | Threshold for 2026 |
|---|---|
| Non-employee compensation (1099-NEC) | $2,000 |
| Rents, prizes, other income (1099-MISC) | $2,000 |
| Royalties | $10 |
| Gross proceeds to attorneys (MISC box 10) | $600 |
| Payment card and network transactions (1099-K) | More than $20,000 and more than 200 transactions |
Two exceptions did not move. Royalties stay at $10 and attorney gross proceeds stay at $600, so a legal settlement can generate a 1099 where an equivalent consulting payment no longer would.
Which Filing Season Uses Which Figure
| Payments made in | Threshold | Forms prepared in |
|---|---|---|
| Calendar year 2025 | $600 | Early 2026 |
| Calendar year 2026 | $2,000 | Early 2027 |
| Calendar year 2027 onward | $2,000, inflation-adjusted | Early 2028 onward |
For a small business the practical effect is a shorter list. Payments between $600 and $2,000 generated a form under the old rule and generate none under the new one.
The record-keeping stays the same. You still need to know what you paid each vendor and how they are classified, because the threshold is applied to a total you have to be able to produce.
- The trigger is the payment date, not the invoice date. A December 2025 invoice settled in January 2026 falls under the new threshold
- Returns prepared in early 2026 still run on $600, because they cover calendar year 2025
When You Have to Issue a 1099
You issue a 1099 when you paid someone, in the course of your trade or business, above the threshold for that payment type during the calendar year.
Three conditions have to line up:
- The payment was made in the course of business, so personal payments are outside the rules
- The recipient is not excluded by entity type
- The total for the year crossed the relevant threshold
Who Is Excluded
Payments to corporations are generally outside 1099 reporting, which removes a large share of vendor payments from the exercise. Two categories override that exclusion: payments for legal services and payments for medical or health care services are reportable even where the recipient is incorporated.
| Payment | 1099 required? |
|---|---|
| Services from an individual or sole proprietor | Yes, above the threshold |
| Services from an LLC not taxed as a corporation | Yes, above the threshold |
| Services from a corporation | No, unless legal or medical |
| Legal services, any entity type | Yes |
| Medical and health care services, any entity type | Yes |
| Merchandise, freight, storage | No |
| Payments made by card or third-party platform | No, the platform reports on 1099-K |
That last row removes duplicated work. Where a contractor was paid through a card or a third-party settlement network, the platform handles the reporting, and issuing your own 1099 would double-count the payment.
In practice that leaves payments for services to individuals, sole proprietors, partnerships and LLCs not taxed as corporations.
Why the W-9 Comes First
An LLC can be taxed several ways, and only the corporate election takes it out of 1099 reporting, so the entity type on its own settles nothing.
That classification appears on the W-9, along with the payee's legal name and taxpayer identification number. A vendor named "Something LLC" tells you nothing on its own about whether a 1099 is due.
- Collect it at onboarding, before the first payment leaves
- Record the entity type against the vendor, not just the file
- Re-request it when a vendor changes name or structure
A vendor who has been paid and moved on has little incentive to return paperwork. A missing TIN also creates a backup withholding problem on top of the reporting one.
Our guide to Form W-9 covers what to collect and how to read the answer.
What a Missing TIN Costs You
A payee who does not give you a correct taxpayer identification number triggers backup withholding at 24%, which you are required to deduct from future payments and remit to the IRS.
It applies across most of the 1099 family, including contractor payments on the NEC and rents and royalties on the MISC. Real estate transactions and retirement distributions sit outside it.
That obligation lands on you, not on the payee. A business that pays a contractor in full without a valid TIN has failed to withhold something it was required to withhold, and the IRS looks to the payer for it.
First Check: Is This Person a Contractor at All?
Everything above assumes the worker is genuinely a contractor. Where they are actually an employee, the correct form is a W-2 and the whole 1099 analysis is beside the point.
That determination looks at the working relationship rather than the label on the agreement, and it carries heavier consequences than a late 1099. A reclassification can bring back payroll taxes and the employer share that was never paid, with penalties attached.
Our guide to W-2 versus 1099 worker classification covers the tests. Settle that question first, because issuing a 1099 to someone who should have been on payroll does not make them a contractor.
Which 1099 Do You Need?
Two of the four cover almost every business filing: the NEC for contractor work, the MISC for rent and royalties.
| Form | Reports | Typical use |
|---|---|---|
| 1099-NEC | Non-employee compensation | Contractors, freelancers, consultants |
| 1099-MISC | Rents, prizes, awards, other income | Office rent, settlements, royalties |
| 1099-K | Payment card and third-party network transactions | Issued by platforms and processors, not by you |
| 1099-INT | Interest paid | Usually issued by financial institutions |
1099-NEC and 1099-MISC are the two a normal operating business issues. The other two typically arrive from elsewhere, not from you.
Non-employee compensation sat on the 1099-MISC until 2020, when it moved to its own form, which is why older guidance and older templates still point at the wrong one.
Other variants in the family arrive from third parties rather than from an operating business:
- 1099-DIV for dividends and distributions
- 1099-B for broker and barter exchange transactions
- 1099-R for retirement plan distributions
- 1099-S for real estate transactions
- 1099-G for government payments, including state tax refunds
These create a reporting question on your own return, not a filing obligation you have to discharge.
The NEC and MISC Deadlines Are Not the Same Date
The NEC is due to the IRS on 31 January. The MISC is not due until 28 February on paper or 31 March electronically, and that gap is where filings go wrong.
| Form | To the recipient | To the IRS, paper | To the IRS, electronic |
|---|---|---|---|
| 1099-NEC | 31 January | 31 January | 31 January |
| 1099-MISC | 31 January | 28 February | 31 March |
| 1099-MISC box 10 | 15 February | 28 February | 31 March |
Recipient copy and IRS copy fall on the same day for the NEC. That is unusual among information returns, and it catches businesses used to the older MISC timetable.
Where a deadline lands on a weekend or legal holiday, it moves to the next business day.
Box 10 of the MISC, covering gross proceeds paid to attorneys, carries a recipient date of 15 February. Every other line on the form is 31 January.
The NEC Does Not Get the Automatic 30-Day Extension
Form 8809, the Application for Extension of Time to File Information Returns, buys an automatic 30 days for most information returns, including the 1099-MISC, 1098 and 5498.
The 1099-NEC is excluded from that automatic path, on the same terms as the W-2 series. An extension for either has to be requested non-automatically: a signed Form 8809, current version, filed by the original due date with the reason box checked.
That exclusion lands on the form most businesses actually issue, which changes how January has to be planned:
- The 31 January NEC deadline should be treated as fixed, because the relief route is discretionary
- Vendor data has to be complete in January, since there is no fallback month to chase missing W-9s
- A non-automatic request is granted on the facts, so it is not something to build a process around
- Neither route moves the recipient statement deadline
Recipient copies run on their own timetable. Extending your IRS deadline does not move the date by which the payee needs their statement, so the January work still has to happen.
Ten or More Returns Means You Must File Electronically
A business filing 10 or more information returns in total must file them electronically. Information returns are the forms reporting payments to others, the 1099 family and the W-2 among them.
That count is aggregate across form types, not per form. The information return family includes, among others:
- The 1099 series, including NEC, MISC, K, INT and DIV
- Form W-2
- Forms 1098, 1095 and 5498
Six 1099-NECs and five W-2s therefore put you over the line, even though neither category reaches ten on its own. Check the IRS list for the full set before concluding you are under.
Electronic filing runs through the IRS system and requires a Transmitter Control Code, an IRS-issued identifier for electronic filers. Applications can take up to 45 days to process, so a business that discovers the requirement in mid-January has already run out of time.
What Paper Filing Costs Without a Waiver
A filer facing undue hardship can request a waiver on Form 8508. Three details decide whether that route is actually available:
- It has to reach the IRS at least 45 days before the due date of the returns it covers, which for 31 January returns means acting in December
- An approved waiver covers the current tax year only, so it is not a standing exemption
- One form is submitted per filer TIN, and fax is the IRS-preferred channel
Filing on paper without an approved waiver is treated as a failure to file. The penalty applies only to the returns exceeding ten, at up to $340 each, so a business paper-filing twelve returns is exposed on two of them, not all twelve.
Penalties for Late or Missing Returns
Penalties apply per return and per payee statement, which means a single missed vendor can generate two charges, not one.
| How late | Penalty per return |
|---|---|
| Up to 30 days | $60 |
| 31 days through 1 August | $130 |
| After 1 August, or not filed | $340 |
| Intentional disregard | $680 |
Annual maximums apply, and they are lower for small businesses than for large ones. Intentional disregard carries no maximum at all, so the exposure there scales with the number of returns involved.
A return with a wrong figure sits in the correctable band. A return never filed accrues at the top rate and stays there, so filing something imperfect costs less than filing nothing.
Exposure compounds two ways:
- The penalty is charged on the return to the IRS and again on the statement to the payee, so one missed vendor can cost twice the headline figure
- Reasonable cause relief exists, and it turns on showing the failure was outside your control rather than on the amount involved
Miss the deadline entirely and you face two chargeable items per vendor, because the return and the payee statement are charged separately.
What to Do Before January
Five things done before December make January mechanical.
- Collect a W-9 before the first payment to every new vendor, regardless of how small you expect the relationship to be
- Record the entity type from that W-9 against the vendor in your books, so the corporation exclusion can be applied without re-reading paperwork
- Run a year-to-date payment report by vendor in December, and flag anyone over the threshold
- Count your total information returns across all types, to establish whether electronic filing applies
- Apply for a Transmitter Control Code if you need one, allowing for the processing time
Steps one and two cannot be recovered in January. The rest are mechanical once the vendor data exists.
A December review also catches the borderline cases while there is still time to check them. A vendor sitting just under $2,000 in early December may cross it with one more invoice.
If You Filed a 1099 With an Error
Errors get fixed with a corrected return, not by refiling from scratch. You submit a new 1099 marked as corrected, showing the right figures.
| Error type | How it is corrected | Needs the payee? |
|---|---|---|
| Wrong money amount or code | A corrected return showing the right figures | No |
| Wrong payee name or TIN | A separate two-step procedure | Usually, to obtain the correct details |
| Return filed that was never required | A corrected return showing zero | No |
A wrong name or TIN is corrected in two passes, in this order:
- File a return reproducing the original entry with the money amounts zeroed out and the corrected box marked
- File a second return carrying the right information, with the corrected box left alone
The VOID box is not a correction tool. It applies only to a form that has not been submitted yet, and marking it on a return already filed changes nothing.
Recipients need a corrected copy too. A payee filing their own return from the original figure will report the wrong number, and the mismatch surfaces on their side.
Timing matters here: an error caught and corrected within 30 days sits in the $60 penalty band. The same error found in September sits at $340.
Four Mistakes That Generate Penalties
Each of these surfaces in January, when there is no time left to fix the underlying cause.
Using the $600 Threshold for 2026 Payments
Systems and checklists built around $600 will over-report for 2026. Over-reporting carries no penalty, so this is the benign direction of the error, and it still means preparing and mailing forms nobody needed.
Under-reporting is the costly direction. A business that heard about the increase and applied it to 2025 payments has under-reported, because the change took effect for payments made after 31 December 2025, and a return never filed carries the full $340 penalty per form.
Missing W-9s Discovered in January
Without a W-9 you have no reliable way to know whether a vendor is incorporated, and no TIN to put on the form.
Two problems follow from that gap:
- You may have to apply backup withholding at 24% to payments already made, out of your own funds if the vendor has been paid in full
- A 1099 filed with a missing or incorrect TIN can draw a penalty of its own
Request the W-9 before the first payment goes out. Once the invoice is settled, you have nothing left to withhold.
Treating the NEC and MISC Deadlines as One Date
NEC returns are due to the IRS on 31 January. The MISC is due 28 February on paper or 31 March electronically.
A business filing everything on the MISC timetable has filed its NECs a month late, at $60 or $130 per return depending on when it notices, and the charge repeats for every contractor on the list.
Setting one internal deadline of 31 January for the whole set avoids the distinction entirely, and costs nothing beyond finishing the MISC work earlier than required.
Counting Only the Forms You Think Of as Yours
The aggregate count reaches further than most businesses expect, and the forms that push a filer over ten are usually the ones nobody was counting:
- W-2s count, including those filed on your behalf by a payroll provider
- Forms 1098, 1095 and 5498 count, which catches businesses with health coverage reporting
- Forms issued under a second EIN do not merge with the first, since the count runs per filer
Check the total in December. The Transmitter Control Code application is the long pole, and it cannot be compressed once January starts. Getting the count wrong costs up to $340 for every return past the tenth.
How FinStackk Helps With 1099 Filings
Most of 1099 season is settled by whether vendor records were collected as payments went out. Our Fin-Books module handles bookkeeping and AP, so vendor payment records are in one place when January arrives, and Fin-Tax tracks the federal, state, county and city deadlines around them.
If you are running a US entity from abroad and have contractors to report on, book a call. The IRS publishes current thresholds and deadlines in its 1099-MISC and 1099-NEC instructions.
Frequently Asked Questions
What is the 1099 income limit for 2026?
The general threshold for payments made in 2026 is $2,000, raised from $600 by the One Big Beautiful Bill for payments made after 31 December 2025. It adjusts for inflation from 2027.
Two exceptions keep their own figures: royalties are reportable at $10, and gross proceeds paid to attorneys at $600. The 1099-K threshold is separate again, at more than $20,000 and more than 200 transactions.
When do I need to issue a 1099?
You issue one when you paid an unincorporated service provider more than the threshold during the calendar year, in the course of your business. Payments to corporations are generally excluded, apart from legal and medical services, and purchases of merchandise are outside the rules entirely.
Recipient copies are due 31 January for both the NEC and the MISC, with the exception of gross proceeds to attorneys at 15 February, so the practical deadline for assembling the information is the end of January.
What happens if I file a 1099 late?
The penalty is charged per return and per payee statement, starting at $60 for returns up to 30 days late, rising to $130 through 1 August, and $340 after that or where the return is never filed.
Intentional disregard carries $680 per return with no annual maximum. Annual caps apply to the other tiers and are lower for small businesses, so filing late is consistently cheaper than not filing.