Businesses that pay independent contractors, freelancers, and other nonemployees for services may need to report those payments to the Internal Revenue Service (IRS) using Form 1099-NEC. For payments made during calendar year 2026, the general reporting threshold is $2,000 or more per recipient for qualifying payments made in the course of a trade or business.
The threshold increased from $600 to $2,000 for payments made after December 31, 2025. Businesses must determine which payments qualify as nonemployee compensation, identify the recipients who require reporting, and follow the applicable filing deadlines.
Understanding the Form 1099-NEC requirements for 2026 helps businesses report payments under the correct information return rules. The IRS provides the official requirements in its Instructions for Forms 1099-MISC and 1099-NEC.
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What Is Form 1099-NEC?
Form 1099-NEC, or Nonemployee Compensation, is an IRS information return used to report certain payments made to people who perform services for a business but are not its employees.
Businesses commonly use this form to report qualifying payments to independent contractors, freelancers, professional service providers, and attorneys. The payer submits the required information to the IRS and provides a recipient statement to the person or business receiving the payment.
Form 1099-NEC is different from Form W-2, which reports employee wages. It is also different from Form 1099-MISC, which covers specified payments such as rents, royalties, and certain other income. The form a business uses depends on the nature of the payment and the applicable IRS reporting rules.
Who Needs to File Form 1099-NEC in 2026?
A business generally must file Form 1099-NEC when it makes qualifying payments for services to a nonemployee in the course of its trade or business, and the payments meet the IRS reporting threshold. The main requirements are explained below.
Business-related payments
The payment must relate to the payer’s trade or business. Businesses, including qualifying nonprofit organizations and government entities, may have information reporting obligations for payments made in their operations. Payments made for personal purposes outside a trade or business generally do not fall under these business payment reporting requirements.
Payments of $2,000 or more
For calendar year 2026, the general threshold for qualifying nonemployee compensation is $2,000 per recipient. Businesses calculate the total qualifying payments made to each recipient during the calendar year. The threshold applies to the annual total, not to each invoice. A business must consider the combined amount of qualifying payments made to the same recipient.
Services performed by nonemployees
Reportable payments can include professional service fees, contractor payments, commissions, and other qualifying compensation for services performed by someone who is not the payer’s employee. The reporting rules also cover qualifying attorney fees. Specific exceptions apply to certain payments, including transactions reported under other information return requirements.
Backup withholding
A business must generally file Form 1099-NEC for a recipient when it withheld federal income tax under the backup withholding rules, regardless of the total payment amount. The applicable IRS instructions explain when backup withholding applies and how the withheld amount must be reported.
Which Payments Must Be Reported on Form 1099-NEC?
The payment’s purpose determines whether Form 1099-NEC applies.
Independent contractor and freelancer payments
Qualifying payments to independent contractors and freelancers for business services generally require Form 1099-NEC reporting when the annual threshold is met.
Examples include fees paid for accounting, design, programming, construction-related services, and other professional or contracted work. The actual reporting requirement depends on the payment arrangement, the recipient’s status, and any applicable exception.
Attorney fees
Payments of $2,000 or more for qualifying legal services provided in the course of a business generally require Form 1099-NEC reporting. The rule also applies to attorney fees paid to incorporated law firms.
However, gross proceeds paid to an attorney in connection with a legal settlement generally fall under Form 1099-MISC reporting rather than Form 1099-NEC. The distinction depends on what the payment represents.
Payments that include parts and materials
When parts or materials are incidental to a service, the reportable nonemployee compensation may include the total payment for labor and materials.
For example, a business payment to a repair service may include both labor charges and the cost of parts supplied as part of the repair. The IRS instructions address how to report these combined payments.
Who Is Exempt From Form 1099-NEC Reporting?
Some payments are exempt from Form 1099-NEC reporting or are covered by another information return. Businesses need to identify the applicable rule for each type of transaction.
Payments to corporations
Payments to C corporations and S corporations are generally exempt from Form 1099-NEC reporting for ordinary services. Exceptions include qualifying attorney fees and certain payments made by federal executive agencies for services.
A business must consider the type of payment and the applicable exception before deciding whether reporting is required.
Purchases of goods
Payments solely for merchandise, equipment, or raw materials generally do not constitute nonemployee compensation for Form 1099-NEC purposes.
When a contractor provides parts or materials as an incidental part of performing a service, however, those costs may be included in the reportable service payment. The treatment depends on the transaction.
Credit card and third-party payment transactions
Payments made through payment cards and qualifying third-party payment networks are generally subject to the payment settlement reporting rules for Form 1099-K.
When a transaction falls under these rules, the business making the payment generally does not report that same payment as nonemployee compensation on Form 1099-NEC. The payment method and applicable reporting provisions determine the treatment.
Employee wages
Businesses report employee wages on Form W-2 under the applicable employment tax rules, rather than using Form 1099-NEC for those wages.
Worker classification depends on the relevant federal tax rules. A contract or job title alone does not determine whether a worker is an employee or an independent contractor.
When Is Form 1099-NEC Due for 2026 Payments?
Businesses generally must file Form 1099-NEC with the IRS and furnish the recipient’s copy by January 31 following the calendar year in which the payments were made. If the deadline falls on a weekend or legal holiday, the due date generally moves to the next business day.
For payments made during calendar year 2026, the general deadline is February 1, 2027, because January 31, 2027, falls on a Sunday.
Businesses required to file 10 or more information returns in aggregate generally must file electronically, subject to applicable IRS rules and exceptions.
Accurate payment records, recipient details, and taxpayer identification numbers help businesses prepare the required information returns. Businesses can refer to the IRS information return requirements for additional details.
How to File Form 1099-NEC Online
Businesses can prepare and submit Form 1099-NEC through an eligible electronic filing provider, including Form1099Online. The process involves collecting recipient information, reviewing payment records, preparing the form, and submitting the required information.
Prepare the recipient information
Collect the recipient’s legal name, address, and taxpayer identification number. Businesses commonly use Form W-9 to obtain this information from contractors and other recipients.
Review the payment records
Calculate qualifying payments made to each recipient during calendar year 2026. Identify payments that fall under Form 1099-NEC reporting requirements and distinguish transactions that belong on another information return.
Complete and submit the form
Enter the payer’s information, recipient details, and reportable compensation in the appropriate fields. Review the entries before submitting the return.
Furnish the recipient statement
Provide the recipient’s copy within the applicable IRS deadline and retain the supporting payment records.
Form1099Online provides an online platform for preparing and filing Form 1099 information returns. Businesses remain responsible for the accuracy of the information submitted and compliance with the reporting requirements that apply to their payments.
Frequently Asked Questions About Form 1099-NEC
What is the Form 1099-NEC threshold for 2026?
The general reporting threshold is $2,000 or more in qualifying nonemployee compensation paid to a recipient during calendar year 2026. Backup withholding rules can require reporting even when payments are below this amount.
Do I need to file Form 1099-NEC for payments below $2,000?
Qualifying nonemployee service payments below $2,000 generally do not meet the standard reporting threshold for 2026. However, backup withholding and other specific IRS rules may require a return.
Do businesses need to issue Form 1099-NEC to an LLC?
An LLC may receive Form 1099-NEC when its payments meet the applicable reporting requirements. The treatment depends on the LLC’s federal tax classification, the nature of the payment, and any relevant exceptions.
Are payments to attorneys reportable on Form 1099-NEC?
Qualifying attorney fees of $2,000 or more generally require Form 1099-NEC reporting, including fees paid to incorporated law firms. Gross proceeds paid to attorneys in connection with legal settlements generally belong on Form 1099-MISC.
What is the deadline for Form 1099-NEC for the 2026 tax year?
For payments made during calendar year 2026, the general deadline to file Form 1099-NEC with the IRS and furnish the recipient’s copy is February 1, 2027.
Can businesses file Form 1099-NEC online?
Yes. Businesses can use an eligible electronic filing provider, such as Form1099Online, to prepare and submit Form 1099-NEC. The information entered on the return must meet the applicable IRS requirements.
Where can businesses find official Form 1099-NEC instructions?
Businesses can refer to the IRS Instructions for Forms 1099-MISC and 1099-NEC and the IRS information return requirements page for official reporting rules and updates.