Key takeaways
- The 1099-NEC threshold is $2,000 or more for payments made after December 31, 2025. Payments made in 2025 still used the $600 threshold.
- Starting with calendar year 2027, the $2,000 amount is adjusted for inflation and rounded to the nearest $100.
- Not every Form 1099-MISC box moved to $2,000. Gross proceeds paid to an attorney stay at $600, and royalties stay at $10.
- Payments you make by card, or that a third party settlement organization settles for you, generally fall under the Form 1099-K rules, not Form 1099-NEC.
- The deadline is January 31 for both filing with the IRS and sending the contractor their copy. If that date falls on a weekend or legal holiday, the next business day applies.
What changed, and when it applies
The One Big Beautiful Bill Act (Public Law 119-21), section 70433, raised the reporting threshold in Internal Revenue Code section 6041(a) from $600 to $2,000. Section 6041A, which also covers payments for services, now points to that same amount instead of its own $600 figure. The effective date in the law reads: "shall apply with respect to payments made after December 31, 2025."
That wording matters because the trigger is the payment date, not the date the work was done. If a contractor finished a project in December 2025 and you paid the invoice in January 2026, that payment counts toward your 2026 total and the $2,000 threshold applies. For the contractor who receives the payment, the date of receipt generally decides which year the income belongs to under the cash method. See cash vs accrual accounting on the first tax return.
The test in section 6041A is "equals or exceeds," so a contractor you paid exactly $2,000 in 2026 does get a Form 1099-NEC.
Threshold by form and payment type
| Form and payment | Paid in 2025 | Paid in 2026 |
|---|---|---|
| 1099-NEC: nonemployee compensation (box 1a on the 2026 form) | $600 or more | $2,000 or more |
| 1099-MISC: rents, prizes and awards, other income, medical and health care payments | $600 or more | $2,000 or more |
| 1099-MISC, box 10: gross proceeds paid to an attorney | $600 or more | $600 or more (unchanged) |
| 1099-MISC: royalties | $10 or more | $10 or more (unchanged) |
| 1099-K from a third party settlement organization | Over $20,000 and over 200 transactions | Over $20,000 and over 200 transactions |
The 1099-K line comes from a separate provision, section 70432 of the same law, which restored the $20,000 and 200-transaction test. Both conditions have to be met, and both use "more than" rather than "or more." For the same test from the seller's side, see whether your LLC will get a 1099-K.
Do you need to file? A quick decision path
Answer these questions in order for each person or business you paid in the course of your business during 2026. Payments for personal expenses are not reported.
- Did you pay by card, or did a third party settlement organization (TPSO) settle the payment? A TPSO is a company that runs a third party payment network. Its contract makes it responsible for paying the sellers on that network. If yes, those payments fall under the Form 1099-K rules; stop here for them. If you paid by check or direct bank transfer, including an ACH (Automated Clearing House) transfer, go to the next question. The IRS says automated clearing houses do not qualify as TPSOs.
- Is the payee a U.S. person? If yes, go on. If not, stop here and see "Foreign contractors" below. Work done entirely outside the United States is generally not reported on Form 1099-NEC. Work done in the United States may need Form 1042-S instead. A Form W-9 or W-8 from the payee tells you which case applies.
- Is the payee a corporation? Payments to a corporation, including an LLC taxed as a C or S corporation, generally do not need a 1099-NEC; stop here. Legal services are the exception: fees paid to a law firm are reportable even if the firm is incorporated. An LLC taxed as a sole proprietorship or partnership is not a corporation for this purpose. If the payee is not a corporation, or the payment was for legal services, go on.
- Did you pay this payee $2,000 or more in total for services during 2026? If yes, file a Form 1099-NEC. If no, go to the last question.
- Did you apply backup withholding to any payment? If yes, file a Form 1099-NEC regardless of the amount. If no, you generally do not need a Form 1099-NEC for this payee. Other payments to the same payee, such as rent, may still need a Form 1099-MISC.
Exceptions that surprise people
Backup withholding. The amount threshold disappears once you have withheld. The IRS instructions say you must file "regardless of the amount of the payment" for anyone you backup withheld from.
Lawyers. Attorney fees for services go on Form 1099-NEC at the $2,000 level. Gross proceeds paid to an attorney, such as a settlement paid to the attorney on a client's behalf, go in box 10 of Form 1099-MISC and still use $600.
Foreign contractors. Form 1099 reporting generally applies to payments to U.S. persons. In most cases, payment to a foreign contractor for work performed entirely outside the United States is foreign source income and is not reported on Form 1099-NEC. The IRS suggests collecting a Form W-8BEN from an individual, or a W-8BEN-E from an entity, to document foreign status. If any part of the work is performed in the United States, that part is U.S. source income. It may need Form 1042-S reporting and withholding instead, so check before you pay.
Filing deadlines and e-filing
Form 1099-NEC is due January 31 both to the IRS and to the contractor, whether you file on paper or electronically. Unlike most other information returns, it does not get an automatic 30-day extension with Form 8809. When January 31 falls on a Saturday, Sunday, or legal holiday, the due date moves to the next business day. For payments made in 2026, check the IRS General Instructions for Certain Information Returns once the 2026 edition is published for the exact date.
If you are required to file 10 or more information returns in total for the year, you must file them electronically. The count is combined across form types, so Forms W-2 and 1099 add together.
If you are the one receiving the payment
A higher threshold means fewer forms, not less tax. Income from your services is taxable whether or not you receive a Form 1099. The IRS puts it this way for Form 1099-K: "Whether or not you receive a Form 1099-K, you must still report any income on your tax return." The same principle applies when a client pays you less than $2,000 and sends no Form 1099-NEC. Tax is generally not withheld from contractor payments either way, which is where estimated tax payments and the safe harbor for an LLC owner come in.
FAQ
What is the 1099-NEC threshold for 2026? $2,000 or more paid to one payee during the year, for payments made after December 31, 2025.
Does the new threshold apply to work done in 2025? The answer depends on when you paid, not on when the work was done. A payment made in January 2026 for December 2025 work falls under the $2,000 threshold.
Will the $2,000 amount change? Yes. Starting with calendar year 2027, it is adjusted for inflation and rounded to the nearest $100. As of October 2026, the IRS had not announced the 2027 amount.
Do I send a 1099-NEC to an LLC? Usually, unless the LLC is taxed as a C or S corporation. Ask for a Form W-9, which shows how the LLC is classified for tax.
I paid a contractor through a payment app. Do I file a 1099-NEC? Usually not, if the app settled the payment as a third party settlement organization; those payments fall under the Form 1099-K rules instead. A plain bank-to-bank transfer started in an app may not count, so check how the app processed the payment.
Sources
- Instructions for Forms 1099-MISC and 1099-NEC, IRS, accessed 2026-10-07
- General Instructions for Certain Information Returns, IRS, accessed 2026-10-07
- 26 U.S.C. § 3406, notes on Public Law 119-21 § 70433(f), Legal Information Institute, accessed 2026-10-07
- 26 U.S.C. § 6041, Legal Information Institute, accessed 2026-10-07
- Instructions for Form 1099-K, IRS, accessed 2026-10-07
- Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, IRS, accessed 2026-10-07
- Understanding your Form 1099-K, IRS, accessed 2026-10-07
This guide is general information based on the sources listed above, not tax advice. For decisions about your situation, talk to a CPA or enrolled agent.
