For as long as most owners have been filing 1099s, the number was $600. Pay a contractor $600 or more in a year and you owed them a Form 1099-NEC by January 31. For payments made in 2026, that number is gone.
For payments made in 2026 and later, the basic reporting threshold is $2,000. The IRS's instructions for Forms 1099-MISC and 1099-NEC put it this way: “For tax years beginning after 2025, the minimum threshold amount for reporting certain payments ... increased to $2,000 and may be adjusted for inflation beginning in calendar year 2027.” The change came from the 2025 tax law the IRS now calls the Working Families Tax Cuts (Public Law 119-21), which our overview of the law for small business owners covers more broadly.
A higher threshold means fewer forms. It doesn't mean fewer rules, and a few of the old numbers survived. This piece walks through the January 2027 filing season in the order you'll actually do the work.
What changed and what didn't
Moved to $2,000 (for 2026 payments):
- Nonemployee compensation on Form 1099-NEC, box 1a: payments for services by someone who isn't your employee, “including parts and materials.”
- Attorneys' fees for legal services, also reported in box 1a of Form 1099-NEC.
- On Form 1099-MISC: rents, prizes and awards, other income, medical and health care payments, crop insurance proceeds, and certain deferred-compensation amounts.
- Backup withholding. The same threshold applies to when backup withholding kicks in on these payments, per Publication 1099.
Still $600:
- Gross proceeds paid to an attorney, such as a settlement payment that runs through a law firm's trust account, reported in box 10 of Form 1099-MISC. This is separate from fees for the attorney's own services.
Still $10:
- Royalties, reported in box 2 of Form 1099-MISC.
Still $5,000:
- Direct sales of consumer products for resale (the checkbox on 1099-NEC box 2 or 1099-MISC box 7).
No threshold at all:
- Any payment from which you actually withheld federal income tax under the backup withholding rules. You file regardless of amount.
The $600 attorney rule is the one most likely to trip people up. If your business pays a $1,500 taxable settlement to a claimant through the claimant's lawyer, you're below the $2,000 line for the claimant's 1099-MISC but over the $600 line for the gross-proceeds 1099-MISC to the lawyer.
October through December: clean up vendor files now
The filing deadline is driven by whatever information you have on hand in January. The work is in getting the information right before then.
Collect W-9s from everyone you might pay $2,000 or more. The threshold applies to each payee's total for the calendar year, so a vendor you've paid $1,400 so far is one invoice away from crossing it. Get the W-9 before you pay the invoice that pushes them over, not in late January when they've stopped answering email.
Use TIN matching. The IRS's TIN Matching program lets payers check name and taxpayer identification number combinations against IRS records before filing. Name and TIN mismatches lead to IRS notices after filing, and Publication 1099 says errors in a TIN or a payee's surname are never treated as “inconsequential” for penalty purposes.
Know when backup withholding applies. If a payee who will cross $2,000 refuses to give you a TIN, you're generally required to backup withhold at 24% on reportable payments. Most small businesses never do this and should handle it as an exception: get the W-9 or stop paying.
Separate how you paid from what you report. Payments you made by credit card, debit card, or through a third-party payment network are reported by the payment processor on Form 1099-K, and per the instructions are “not subject to reporting on Form 1099-MISC or Form 1099-NEC.” Check, ACH, wire, and cash payments are yours to report. Run your vendor totals by payment method so you don't double-report card payments.
Check entity type, with the attorney exception in mind. Payments to corporations are generally exempt from 1099-NEC reporting. That exemption “does not apply to payments for legal services,” so law firms organized as corporations still get a 1099 for fees of $2,000 or more and for gross proceeds of $600 or more.
The new boxes
The December 2026 revision of the forms adds boxes for two other provisions of the same law. Use this revision for 2026 information filed in early 2027.
- Box 1b (cash tips) and box 1c (Treasury Tipped Occupation Code). These support the new tips deduction under section 70201 of Public Law 119-21. Box 1b reports cash tips included in box 1a. “Cash tips include tips paid in cash or charged by customers.” Box 1c takes up to two occupation codes from the IRS's list at IRS.gov/TTOC.
- Box 1d (overtime compensation). This supports the overtime provision in section 70202(a). It reports “qualified overtime compensation” included in box 1a, defined by reference to section 7 of the Fair Labor Standards Act. The instructions give an example: “only the 'half' portion of 'time-and-a-half' compensation would be reported in box 1d.”
Most businesses paying independent contractors will leave these new boxes blank. They are mostly for payers whose nonemployee workers receive tips through the payer. If you're entering FLSA overtime on a 1099-NEC, stop and ask whether that worker is really a contractor. Overtime under FLSA section 7 is an employee concept, and our guide to worker classification and the 2026 contractor classification rules explain the tests.
The calendar for the 2027 filing season
The statutory deadline for Form 1099-NEC is January 31, for both filing with the IRS and furnishing the recipient's copy. When a due date falls on a weekend or legal holiday, it moves to the next business day. January 31, 2027 is a Sunday.
- Monday, February 1, 2027: File Form 1099-NEC with the IRS and furnish copies to recipients. Furnish most Form 1099-MISC recipient copies by this date as well.
- Mid-February 2027: Recipient copies of Form 1099-MISC reporting amounts in box 8 or box 10 (including attorney gross proceeds) are due February 15. February 15, 2027 is Presidents Day, a federal holiday, so the next-business-day rule moves it to Tuesday, February 16.
- Monday, March 1, 2027: Paper Form 1099-MISC is due to the IRS (the February 28 deadline falls on a Sunday).
- Wednesday, March 31, 2027: Electronically filed Form 1099-MISC is due to the IRS.
E-filing is probably mandatory for you. For information returns due on or after January 1, 2024, you must file electronically if you file 10 or more information returns in total, counting all types together. The IRS's Information Returns Intake System (IRIS) portal handles 1099-NEC and 1099-MISC filing if your accounting software doesn't.
Don't forget the states. Your state may require its own copy of Form 1099-NEC or 1099-MISC, and state reporting thresholds don't automatically follow federal changes. Check each state where you file before assuming $2,000 applies there.
A worked example
Consider a 15-person landscape design firm reviewing its 2026 vendor payments in December:
- A freelance CAD drafter, paid $1,850 by ACH. Under the new threshold, no 1099-NEC. Last year, at $600, she would have gotten one.
- A sole-proprietor irrigation subcontractor, paid $14,200 by check, including materials. 1099-NEC, box 1a, for the full $14,200.
- A web developer, paid $3,000, all by business credit card. The card processor reports this on Form 1099-K. The firm doesn't issue a 1099-NEC.
- An outside law firm organized as a professional corporation, paid $2,400 in fees. 1099-NEC, box 1a. The corporate exemption doesn't apply to legal services.
- A $1,200 payment of taxable damages to settle a contract dispute, paid to the claimant's attorney. The claimant gets no 1099-MISC (under $2,000), but the attorney gets a 1099-MISC for $1,200 in box 10 gross proceeds (over $600).
- An office lease paid to an individual landlord, $36,000 for the year. 1099-MISC, box 1, rents.
That's four forms where the old rules would have produced six. The change matters less than most headlines suggest, because the payees who cross $2,000 tend to be the ones you were already reporting.
What to watch in 2027
The $2,000 figure applies to 2026 payments. Publication 1099 says the threshold “will be adjusted for inflation beginning in calendar year 2027” (the form instructions say “may be”). As of October 2026, the indexed figure for 2027 payments has not yet appeared in the 1099 instructions. If you set a vendor-onboarding rule for next year (“get a W-9 from anyone we'll pay $2,000 or more”), plan to update the number when the IRS publishes it.
The penalty rules didn't change. Late and incorrect information returns are penalized per return, with lower annual maximums for small businesses with average gross receipts of $5 million or less. Current amounts are on the IRS's information return penalties page. Reasonable cause is a defense, but “my software defaulted to $600” or “I thought the threshold went up for everything” won't qualify.
Frequently asked questions
Should I still send 1099s to contractors I paid between $600 and $1,999 in 2026?
You're no longer required to file them with the IRS for 2026 payments. Some businesses will send them anyway out of habit. If you do, they're voluntary, and your contractors are still required to report the income either way. Make sure your accounting software's threshold setting is updated so it doesn't generate required-looking forms by default.
Does the higher threshold change who counts as a contractor?
No. The threshold controls reporting, not classification. A worker you control like an employee is an employee whether you pay them $500 or $50,000.
Is this the same change as the Form 1099-K threshold?
No. The 1099-K rules apply to payment processors and online platforms and have their own thresholds. The $2,000 change applies to the 1099-NEC and 1099-MISC forms you file as a payer. For year-end steps that interact with filing season, see our year-end tax planning checklist.
This article reflects the IRS's December 2026 instructions for Forms 1099-MISC and 1099-NEC and Publication 1099 (2026) as of October 2026. Confirm thresholds and due dates against the current IRS instructions before filing. This is general information, not tax or legal advice for your situation.
This article is for educational purposes only and does not constitute legal, tax, or financial advice. Consult a qualified professional for guidance specific to your situation.