Payroll · Tax
The 1099-NEC Threshold Is Now $2,000: What to File and When
The $600 rule no longer applies. What the new $2,000 threshold covers, what it does not, who is exempt entirely, and the January deadlines.
For payments made in 2026, reported in January 2027, the Form 1099-NEC threshold is $2,000 rather than $600: the IRS raised the minimum reporting threshold for most information returns for tax years beginning after 2025. Several thresholds did not move — attorney gross proceeds stay at $600 and royalties at $10 — and payments made by card or through a payment app are reported by the processor on Form 1099-K, not by you. Form 1099-NEC is due to both the recipient and the IRS on 31 January.
If you know one number about 1099s, it is probably $600. For the forms you file in January 2027, that number is wrong.
The reporting threshold for most information returns, including Form 1099-NEC, has risen to $2,000. This guide covers what changed, what did not, which payments are exempt entirely, and what to do between now and the January deadline.
What Changed, and Which Year It Applies To
The IRS instructions for Forms 1099-MISC and 1099-NEC state it plainly: for tax years beginning after 2025, the minimum threshold for reporting certain payments on information returns, and for backup withholding on those payments, increased to $2,000, and may be adjusted for inflation beginning in calendar year 2027.
In practical terms for a calendar-year business:
- Payments made during 2026 are reported on the forms you file in January 2027, using the $2,000 threshold.
- Payments made during 2025 were reported in January 2026 under the old $600 threshold. Nothing about those filings changes.
- From 2027 onward the figure may be indexed, so it is worth re-checking each year rather than memorizing $2,000 the way everyone memorized $600.
So the test for this filing season is straightforward: for each unincorporated contractor or service provider, add up what you paid them during 2026. If the total reaches $2,000, a Form 1099-NEC is due.
What Did Not Change (This Is Where It Gets Missed)
The increase is not universal. Several thresholds sit outside it, and they are the ones that catch people out:
- Gross proceeds paid to an attorney are still reportable at $600, in box 10 of Form 1099-MISC. If you settled a matter and paid a law firm on someone's behalf, the old number still applies.
- Royalties are still reportable at $10 or more.
- Any amount from which you withheld federal income tax must be reported, whatever the total. If backup withholding applied because a contractor never gave you a valid taxpayer identification number, the dollar threshold is irrelevant — you file.
- Payments for legal services must be reported even when the recipient is a corporation. The usual corporate exemption does not apply to them.
Who Does Not Get a 1099 At All
Two exclusions matter more than the threshold, because they remove the obligation entirely.
Corporations are generally exempt. Payments to a corporation — including an LLC that has elected to be treated as a C or S corporation — generally do not require a 1099. The exceptions are the ones above: legal services always, and medical or health care services provided by corporations, including professional corporations. This is exactly what the Form W-9 is for: the contractor's tax classification on that form is what tells you whether they are a corporation.
Payments by card or payment app are not yours to report. The IRS is explicit that payments made with a credit card or payment card, and certain other payments including third-party network transactions, are reported on Form 1099-K by the payment settlement entity, and are not subject to reporting on Form 1099-MISC or Form 1099-NEC. If you paid a contractor by business credit card or through a platform that settles payments, the processor handles the reporting and you do not file a 1099-NEC for those amounts.
The practical consequence is that how you paid matters as much as how much you paid. A contractor you paid $9,000 by bank transfer needs a 1099-NEC. The same contractor paid the same amount by company card does not.
1099-NEC, 1099-MISC and 1099-K: Which Form Is Which
| Form | What it reports | Who files it | Threshold for 2026 payments |
|---|---|---|---|
| 1099-NEC | Services performed by someone who is not your employee, and payments to an attorney for legal services | You, the business making the payment | $2,000 |
| 1099-MISC | Rents, prizes and awards, other income, medical and health care payments, crop insurance, and similar | You, the business making the payment | $2,000 for most boxes; $600 for attorney gross proceeds; $10 for royalties |
| 1099-K | Payments settled through payment cards and online marketplaces | The payment app, marketplace or card processor — not you | Over $20,000 and more than 200 transactions |
The 1099-K line is the one that causes arguments. A payment app or online marketplace is required to send a Form 1099-K when payments for goods or services total over $20,000 in more than 200 transactions. That is the platform's obligation to the recipient, and it is separate from your obligation as a payer — which, for card-settled payments, does not exist.
The Deadlines
- Form 1099-NEC — 31 January. Both the copy to the recipient and the copy to the IRS are due on the same date. There is no later electronic deadline.
- Form 1099-MISC — 31 January to the recipient, then to the IRS by 28 February on paper or 31 March electronically.
- Form W-2 — 31 January to employees and to the Social Security Administration, which is why January is the month it all lands at once.
The NEC deadline is the strict one. A single date for both copies means there is no quiet extra month to reconcile vendor totals after the recipients have their forms.
You Probably Have to File Electronically
The electronic filing threshold is no longer 250 returns. Regulations effective for information returns required to be filed on or after 1 January 2024 lowered it to 10, and the count is an aggregate across all your information returns — 1099s and W-2s together, not 10 of each.
Four W-2s and seven 1099-NECs is eleven returns, and that business must e-file. If your plan was to mail paper forms because there are only a handful, check the total first.
What Late or Missing Forms Cost
Information return penalties are charged per return, and they escalate by how late the form is. For returns due in 2026, the IRS published these amounts:
| How late | Penalty per return |
|---|---|
| Up to 30 days late | $60 |
| 31 days late through 1 August | $130 |
| After 1 August, or not filed at all | $340 |
| Intentional disregard | $680, with no maximum |
These figures are adjusted annually, so the amounts for returns due in 2027 will differ slightly. Two things about them are worth noting. The penalty applies per return, so a business that misses fifteen contractors is not paying one penalty. And it applies separately to the payee statement and the IRS copy, which is how a modest oversight becomes a four-figure problem.
What to Do Between Now and January
The work that makes January easy happens in November and December.
- Collect the missing W-9s now. You need each contractor's legal name, taxpayer identification number and tax classification. Chasing a W-9 in late January, from someone you no longer work with, is the single most common reason a filing goes late — and a missing TIN is what triggers backup withholding at 24%.
- Pull vendor totals for the full year and sort by amount. Anyone at or above $2,000 is in scope unless they are a corporation or were paid by card.
- Tag the payment method. Separate bank transfers and checks from card and platform payments, because the second group is not yours to report. This is the step most people skip, and it produces duplicate reporting when the processor files a 1099-K for the same money.
- Check the ones just under the line. A contractor at $1,900 in your books may be at $2,100 once a December invoice posts. Decide from final figures, not November ones.
- Make sure the books are current first. None of the above is possible from an incomplete ledger. If you are months behind, the catch-up has to come first — see what to do when your books are behind and the cost and timeline of a catch-up, which explains why starting in October beats starting in February.
Frequently Asked Questions
I paid a contractor $1,500 in 2026. Do I file a 1099-NEC?
No. For payments made in 2026, the Form 1099-NEC threshold is $2,000, so $1,500 to an unincorporated contractor does not require one. Two exceptions override that: if you withheld any federal income tax from the payments, you file regardless of the amount, and if the payment was for legal services, report it. The contractor still owes tax on the income either way — the threshold governs your filing duty, not their liability.
Has the 1099 threshold changed from $600?
Yes. For tax years beginning after 2025 the threshold for most information returns, including Form 1099-NEC, rose from $600 to $2,000, and may be inflation-adjusted from 2027. The $600 figure still applies to gross proceeds paid to an attorney, reported in box 10 of Form 1099-MISC.
We pay all our contractors through a payment app. Do we file 1099s?
Generally no, for those payments. Payments made by credit or payment card and through third-party networks are reported on Form 1099-K by the payment settlement entity, not on a 1099-NEC by you. Watch for mixed cases: a contractor paid partly by card and partly by bank transfer needs the bank-transfer total assessed against the $2,000 threshold on its own.
Do I need to send a 1099 to an LLC?
It depends on how the LLC is taxed, which is why the W-9 matters. An LLC treated as a C or S corporation is generally exempt. A single-member LLC or one taxed as a partnership is not, and gets a 1099-NEC at $2,000 or more. Payments for legal services are reportable whichever applies, and medical and health care payments are reportable even to corporations.
What happens if I file a 1099 I did not need to send?
It is not a penalty situation, but it is not harmless either. An unnecessary 1099-NEC reports income to the IRS under someone's taxpayer identification number, and if a 1099-K already covers the same payments the recipient appears to have been paid twice. If you catch it, file a corrected return rather than leaving it; the recipient will otherwise spend their filing season explaining the difference.
Not sure which of your contractors need forms this January? See how our payroll service handles year-end filings, including W-2s and 1099s, or book a free consultation before the deadline gets close.
Primary sources
This guide is general information, not advice on your situation. Tax and accounting outcomes turn on facts we have not seen. If you want an answer for your circumstances, book a free 30-minute call and we will give you one.