Form 1099-NEC is the IRS form businesses use to report payments of $2,000 or more to independent contractors and other nonemployees. The threshold rose from $600 to $2,000 for payments made in 2026, under the One Big Beautiful Bill Act. You must send forms for 2026 payments to both the IRS and your contractors by February 1, 2027. At Nexus United Inc., our Delray Beach team prepares and files 1099s for small businesses every January, and the biggest change in years is the higher threshold.
The new rule means fewer forms for many small businesses. It does not mean less recordkeeping. You still need a Form W-9 from every contractor, and the threshold will rise with inflation starting in 2027. A missed or late 1099-NEC can cost you a penalty for each form.
What Changed for 1099-NEC Filers in 2026
| Rule | Payments made in 2025 | Payments made in 2026 |
|---|---|---|
| 1099-NEC and 1099-MISC reporting threshold | $600 or more | $2,000 or more, indexed for inflation after 2026 |
| Backup withholding threshold | $600 | Follows the new $2,000 threshold |
| Form 1099-K (card and payment app sales) | $20,000 and 200 transactions | $20,000 and 200 transactions |
| Electronic filing required | 10 or more total information returns | 10 or more total information returns |
| Due date | February 2, 2026 | February 1, 2027 |
The change applies by the date you pay, not the date work was done. A $1,500 payment made in December 2025 still needed a 1099-NEC. The same payment made in January 2026 does not, unless that contractor’s total for 2026 reaches $2,000.
A Short History: Why the 1099-NEC Exists
The IRS brought back Form 1099-NEC for the 2020 tax year after nearly 40 years. Before that, businesses reported contractor pay in Box 7 of Form 1099-MISC. The change came from the PATH Act of 2015. It gave the IRS one early due date for contractor pay, so it could match income against tax returns sooner and stop fraudulent refund claims, especially for the Earned Income Tax Credit.
Who Should Get a 1099-NEC?
You generally must file a 1099-NEC when all four of these are true:
- You paid someone who is not your employee.
- You paid them for services in the course of your trade or business.
- The payee is an individual, partnership, estate or, in some cases, a corporation.
- You paid them $2,000 or more during 2026.
Common examples include freelancers, independent contractors, consultants, repair workers, cleaning services and attorneys.
Payments that usually do not need a 1099-NEC:
- Payments to most C and S corporations (attorney fees are an exception)
- Wages paid to employees, which go on Form W-2
- Payments you made by credit card, debit card or apps like PayPal, which the payment company reports on Form 1099-K
- Payments for merchandise, freight or storage
- Personal payments, such as a handyman hired for your own home
If a worker should really be an employee, a 1099 does not fix the problem. The IRS looks at behavioral control, financial control and the relationship between the parties.
1099-NEC vs 1099-MISC
| Payment type | Form | Box |
|---|---|---|
| Fees for services by contractors and freelancers | 1099-NEC | Box 1 |
| Attorney fees for legal services | 1099-NEC | Box 1 |
| Direct sales of $5,000 or more of consumer products for resale | 1099-NEC | Box 2 checkbox |
| Rent for office space or equipment | 1099-MISC | Box 1 |
| Royalties | 1099-MISC | Box 2 |
| Prizes and awards not for services | 1099-MISC | Box 3 |
| Gross proceeds paid to an attorney, such as a settlement | 1099-MISC | Box 10 |
Royalties keep a separate $10 reporting threshold. Most other 1099-MISC boxes follow the new $2,000 rule.
1099-NEC Due Dates
| Tax year of payments | Copy to contractor | File with IRS |
|---|---|---|
| 2025 | February 2, 2026 | February 2, 2026 |
| 2026 | February 1, 2027 | February 1, 2027 |
The normal date is January 31. When it falls on a weekend, the deadline moves to the next business day. There is no automatic extension for the 1099-NEC. The IRS grants a 30 day extension only in limited cases, such as a disaster or a death, using Form 8809.
Collect a Form W-9 Before You Pay Anyone
Form W-9, Request for Taxpayer Identification Number and Certification, gives you the contractor’s legal name, address and taxpayer ID. Get it before the first payment, even for small jobs. A repair worker you pay $800 in March and $1,500 in October crosses the $2,000 line, and tracking them down in January is much harder.
Keep W-9s in your files. They are not sent to the IRS. If a contractor refuses to provide a valid taxpayer ID, you must withhold 24% of reportable payments as backup withholding and send it to the IRS.
Good practice for every business:
- Require a signed W-9 before the first invoice is paid
- Set up each contractor as a vendor in your accounting software and flag them for 1099 tracking
- Check names and IDs using the IRS TIN Matching program
- Review contractor totals each quarter, not just in January
1099-NEC Penalties
The IRS charges a penalty for each 1099 you file late, file wrong or never file. A separate penalty can apply for failing to give the contractor their copy. These were the amounts per form for returns due in 2026:
| When the correct form is filed | Penalty per form |
|---|---|
| Within 30 days of the due date | $60 |
| After 30 days but by August 1 | $130 |
| After August 1 or never filed | $340 |
| Intentional disregard | $680 or more, with no yearly cap |
These amounts rise a little each year with inflation. Smaller businesses, those with average gross receipts of $5 million or less, have lower yearly maximums. To see how 1099 penalties fit with other costly mistakes, read our list of the top 15 IRS penalties every business owner must know.
If you had a good reason for filing late, you may be able to get the penalty removed. Our guide to IRS penalty abatement explains first time relief and reasonable cause.
Missing 1099s can also cause trouble in an audit. The IRS may question your contractor expense deductions if you cannot show proper reporting and payment records. Learn which write offs need the strongest records in our guide to tax deductions for small businesses.
How to File Form 1099-NEC
You have three main options:
- IRS IRIS portal: the IRS Information Returns Intake System lets businesses file 1099s online for free. You need an IRIS Transmitter Control Code before you file, so apply well before January.
- Accounting or payroll software: many programs file 1099s for you from your vendor records.
- Paper forms: allowed only if you file fewer than 10 information returns in total. You must use official red ink IRS forms with Form 1096, not printouts from the IRS website.
The IRS is phasing out its older FIRE e-file system, so most filers will move to IRIS or software that connects to it.
Florida Businesses and Form 1099-NEC
Florida has no state income tax, so Florida does not require a state copy of Form 1099-NEC. You file only with the IRS. If you pay contractors who live or work in other states, those states may have their own filing rules. Read more about state and federal obligations in our guide on how to file small business taxes in Florida.
Year End 1099 Checklist
- Pull a list of every contractor you paid in 2026
- Total payments by contractor, leaving out card and payment app payments
- Flag everyone at $2,000 or more, plus all attorneys
- Confirm each has a signed W-9 on file
- Check for missing or mismatched taxpayer IDs
- Prepare Forms 1099-NEC and 1099-MISC
- Send contractor copies and file with the IRS by February 1, 2027
- Save copies for at least 3 years
How Nexus United Inc. Can Help
Nexus United Inc. prepares and files Forms 1099-NEC and 1099-MISC for small businesses in Delray Beach, West Palm Beach and across Palm Beach County. We collect W-9s, review contractor totals, file electronically and send copies to your vendors and to you. Call (855) 639 8740 or contact our team before the January rush.
Frequently Asked Questions About Form 1099-NEC
What is the 1099-NEC threshold for 2026?
For payments made in 2026, you file a 1099-NEC when you pay a nonemployee $2,000 or more for services. The old threshold of $600 still applies to payments made in 2025.
When is Form 1099-NEC due in 2027?
Forms for 2026 payments are due February 1, 2027, to both the IRS and the contractor. January 31, 2027 falls on a Sunday, so the deadline moves to Monday.
Do I send a 1099-NEC to an LLC?
Usually yes, if the LLC is a single member LLC or taxed as a partnership. If the LLC elected to be taxed as a C or S corporation, you generally do not, unless you paid it for legal services. The W-9 tells you how the LLC is taxed.
Do I need a 1099-NEC if I paid a contractor through PayPal or a credit card?
No. Payments made by card or through a payment app are reported by the payment company on Form 1099-K. Leave them out of your 1099-NEC totals.
What is the difference between 1099-NEC and 1099-MISC?
The 1099-NEC reports pay for services by nonemployees. The 1099-MISC reports other payments, such as rent, royalties, prizes and attorney settlement proceeds.
What happens if I miss the 1099-NEC deadline?
File as soon as you can. The penalty per form is lowest if you file within 30 days and grows after that. You may qualify for penalty relief if you had reasonable cause.
