1099 threshold 2026: the $2,000 rule, the February 1, 2027 deadline and who gets a 1099.

The 1099 threshold for 2026 is $2,000. For payments made in 2026, you send a 1099-NEC (or a 1099-MISC for rent and a few other payments) to each contractor or other non-corporate payee you paid $2,000 or more during the year. It was $600 through 2025. The forms are due February 1, 2027.

The 1099 threshold for 2026 payments is $2,000

The 2025 tax law (P.L. 119-21, section 70433) raised the reporting threshold for Forms 1099-NEC and 1099-MISC from $600 to $2,000. It applies to payments made on or after January 1, 2026, so the first forms under the new rule are the ones you send in early 2027.

Four details matter in practice:

• It is a yearly total per payee. Add up everything you paid one contractor during 2026. Five invoices of $450 add up to $2,250, and that contractor gets a form.
• The date you paid decides the year. A December 2025 payment belongs to the 2025 forms and the old $600 rule. A January 2026 payment counts toward the $2,000.
• It can move with inflation from 2027. The IRS instructions say the $2,000 may be adjusted for inflation beginning in calendar year 2027, so check the figure again before next year’s forms.
• A few payments keep their old figures. Royalties are still reported from $10. Gross proceeds paid to an attorney (a settlement paid through a lawyer, for example) and cash paid to a commercial fisherman for the catch are still reported from $600.

The threshold only decides whether you file a form. A contractor paid $1,500 still owes tax on that $1,500, and you still deduct it as a business expense.

The 1099-NEC deadline: February 1, 2027

The usual deadline is January 31. In 2027 that date is a Sunday, so the forms for 2026 payments are due the next business day.

If you file ten or more information returns in total (1099s and W-2s together), every one of them has to be filed electronically. The IRS runs a free online portal for this, called IRIS, and most payroll and accounting software can file the forms for you.

Does my state use the same threshold?

Not necessarily. The federal law changed the federal threshold only. Each state sets its own 1099 filing rules: some follow the federal figure, some keep their own threshold, and some only want a copy when state tax was withheld. Many states receive the forms through the IRS Combined Federal/State Filing Program, but not all of them do. The states people ask about most, with each one’s own guidance:

• CaliforniaThe Franchise Tax Board wants information returns for payments to California residents and for payments with a California source.
• MichiganTreasury wants a copy of every 1099 issued to a Michigan resident. 1099-NECs always go to Treasury directly, and so does any 1099 you file through the IRS’s IRIS portal, because Michigan does not receive IRIS copies.
• PennsylvaniaThe Department of Revenue wants a copy of each federal 1099-NEC or 1099-MISC you file for Pennsylvania-source income, by January 31.
• VirginiaVirginia Tax only wants 1099s that show Virginia income tax withheld.

Texas has no state personal income tax, so a Texas business only deals with the federal forms. If you have contractors in several states, the rules of each state where you report can apply, so check them before you assume the $2,000 figure applies there too.

Who needs a 1099 from your business

You send a 1099 when all of these are true:

• You paid in the course of your trade or business, not as a personal payment
• The payee is not your employee
• The payee is an individual, a sole proprietor, a partnership or an LLC taxed as one of those
• You paid them $2,000 or more during 2026 by check, bank transfer or cash
• The payment was for services, rent or one of the other payment types on the forms

You generally do not send one for:

• Employees, who get a W-2 through payroll
• Most payments to corporations, including S corporations
• Payments for goods and merchandise only
• Payments by credit card or through a payment network such as PayPal, which the payment company reports on a 1099-K

Here is what that looks like for one business. The list below is the kind we build each December for contractors and their subcontractors, and the same logic works for an agency paying freelancers. If you run a building business, our page on contractors and their subcontractors covers how we keep these payments tracked all year.

Do you send a 1099 to an LLC or an S corp?

The name of the business does not tell you. Its tax classification does, and that is printed on the W-9 the payee gives you.

• Single-member LLC taxed as a sole proprietorship: yes, once you pay $2,000 or more.
• LLC taxed as a partnership: yes, once you pay $2,000 or more.
• LLC that elected to be taxed as an S or C corporation: generally no.
• S corporations and C corporations: generally no, with two main exceptions. Payments for legal services and medical and health care payments are reported even when the payee is a corporation.

1099-NEC vs 1099-MISC

Both forms use the $2,000 threshold for most payments in 2026. The difference is what you paid for.

The 1099-NEC also has the earlier IRS deadline: February 1, 2027, against March 1 or March 31, 2027 for the 1099-MISC.

Employee or contractor? W-2 vs 1099

A 1099 only fits someone who is genuinely in business for themselves. The IRS looks at the whole relationship, grouped into three questions:

Behavioral control

Do you control how, when and where the work is done, or only the result?

Financial control

Do they invest in their own tools, set their own prices and work for other clients?

Relationship

Is there a contract for a project, or an open-ended role with benefits that looks like a job?

If the answers point to an employee, that person belongs on payroll with a W-2, whatever the paperwork says. The IRS explains the test on its page about independent contractors and employees, and it is worth reading before you bring someone on for the long term.

Collect W-9s before you pay

A Form W-9 gives you the payee’s legal name, taxpayer identification number and tax classification. That is everything you need to decide whether a 1099 is due and to fill it in correctly.

If a payee will not give you a taxpayer identification number, you may have to start backup withholding on their reportable payments. A request made before you pay usually settles it.

A December to January 1099 timeline

Early December

Run a 2026 payments-by-vendor report and flag everyone at or near $2,000.

Mid December

Request any missing W-9s and check legal names and tax ID numbers against them.

Early January

Close the December books so the totals are final. Take card and payment-network payments out of the 1099 totals.

By February 1, 2027

Send 1099-NEC copies to contractors and file them with the IRS. Send 1099-MISC copies to payees (by February 16, 2027 for attorney gross proceeds in box 10).

By March 1 or March 31, 2027

File 1099-MISC with the IRS, on paper or electronically. Send state copies where your state asks for them.

The rest of the year-end work, from reconciling December to closing the year, is in our year-end bookkeeping checklist.

How we handle 1099s

For clients on payroll, 1099s are part of the service: we set each contractor up with a W-9 at the start, tag their payments to them all year, send you the December list for a quick check and file the forms by the deadline. See 1099 filing with payroll for how the payroll side works, or tax preparation and 1099 filing if you mainly want the year-end forms and your return handled together. Both come in our Growth plan.

Not sure your contractor payments are coded to the right vendors? Add us as your accountant and we will tell you, in plain English, in about 48 hours: get a free books review. Nothing in your books changes.

Frequently asked questions