If your service business pays subcontractors, independent helpers or other unincorporated businesses for work, you probably need to send them a Form 1099-NEC and file it with the IRS. For payments made in 2026, the reporting threshold rose from $600 to $2,000. The deadline to send the forms and file them is February 1, 2027, because January 31 falls on a Sunday.
In this article
Who gets a 1099-NEC
- independent contractors and sole proprietors you paid for services;
- LLCs taxed as sole proprietorships or partnerships;
- attorneys, even when they are incorporated.
Corporations, both C and S, generally do not receive one. Employees get a W-2 instead.
The new threshold
For payments made in 2026, you report a payee when you paid them at least $2,000 during the year. The threshold was $600 for decades and is adjusted for inflation in later years. Check your bookkeeping for payees near the line.
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Get a W-9 before you pay
The W-9 gives you the payee's legal name, address, business type and taxpayer ID number. Ask for it before the first payment. Without a valid number, you may have to withhold 24% of the payment as backup withholding and send it to the IRS.
Deadlines
Send copy B to the payee and file with the IRS by January 31, or the next business day when it falls on a weekend. For 2026 payments, that is February 1, 2027. Many states require their own copy.
How to file
If you file 10 or more information returns in the year, you must file electronically. The IRS offers a free portal called IRIS, and most bookkeeping software can file for you.
Payments that do not count
Payments by credit card or through payment platforms go on the 1099-K filed by the processor. Payments for merchandise, rent paid to a real estate agent and payments to corporations are handled differently. Your tax preparer can confirm edge cases.
Clean it up in December
- run a report of payments by vendor for the year;
- mark who passed $2,000 and how each was paid;
- chase missing W-9s before the holidays;
- confirm names and numbers match the W-9 to avoid IRS notices.
An example
A pool service company in Arizona paid 14 subcontractors in 2026. In December, it ran a vendor report, found nine above $2,000 and three missing W-9s, collected them before Christmas and filed through its bookkeeping software on January 18. No penalties and no last-minute calls.
Common mistakes
Paying without a W-9, using the old $600 threshold, sending 1099s for card payments, mismatched names and numbers and waiting until the last week of January.
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Frequently asked questions
Do I need to send a 1099 if I paid a subcontractor by credit card?
Generally no. Payments made by credit card or through payment apps and platforms are reported by the payment company on Form 1099-K, so you do not include them on the 1099-NEC. Payments by check, cash, ACH or Zelle sent directly to the subcontractor are the ones you report yourself.