If you pay contractors, the rule you have followed for decades just changed. The $600 threshold for issuing Form 1099-NEC is gone. For payments made during 2026, the threshold rises to $2,000 (Source: IRS, Instructions for Forms 1099-MISC and 1099-NEC, 12/2026).
That sounds like less paperwork, and it is. But the change has a sharp edge: the reporting threshold moved, and almost nothing else did. Business owners who read the headline and stop there tend to make expensive assumptions. Here is the full picture before January arrives.
What actually changed
Two thresholds moved for 2026, and they moved in different directions for different reasons.
| Form | Previous threshold | 2026 threshold | Applies to |
|---|---|---|---|
| 1099-NEC (nonemployee compensation) | $600 | $2,000 | Payments made in 2026 |
| 1099-K (payment card / third-party network) | Lowered thresholds under prior guidance | $20,000 and more than 200 transactions | Both conditions must be met |
The 1099-K point matters for anyone selling through PayPal, Venmo for business, Stripe, Square, Etsy, or a similar platform. The threshold returns to $20,000 and more than 200 transactions — and both conditions have to be met before the platform is required to issue the form (Source: IRS, FS-2025-08 / IR-2025-107).
So a contractor who collects $35,000 across 40 jobs on a payment app may receive no 1099-K at all. The income is still fully reportable. More on that in a moment.
What did not change — and this is the part that costs people money
The income is still taxable
This is the single most important sentence in this article. A higher reporting threshold does not make income tax-free. If your business paid a contractor $1,800 in 2026, you do not issue a 1099-NEC — but that contractor still owes tax on the $1,800, and your business still deducts it as an expense.
The 1099 is an information return. It tells the IRS about income that already exists. Removing the form does not remove the income, and it does not remove your obligation to keep records that support the deduction.
Expect confusion here. Some contractors will assume that a missing form means nothing to report. It does not. That assumption is how underreporting notices start.
The W-9 is still mandatory — at any dollar amount
Do not let the higher threshold change your intake process. Collect a signed Form W-9 from every vendor and contractor before you issue the first payment, regardless of amount.
Two reasons. First, you rarely know in advance who will cross $2,000 by December. A handyman you hired for one $400 job in February may bill $4,000 by November. Chasing a W-9 in January, after the work is done and the relationship is over, is one of the least pleasant tasks in small business. Second, the W-9 is your documentation that the payee is not an employee and that you have their correct taxpayer identification number.
The rule to keep is simple: no W-9, no payment.
The January 31 deadline is unchanged
Form 1099-NEC is still due January 31 — to the recipient and to the IRS. There is no separate, later date for the government copy the way there is for some other information returns. Build your January around it.
What this means for your business, practically
Fewer forms is genuinely good news for a small operation. If you use a dozen occasional subcontractors and only three cross $2,000, your January filing load drops substantially.
But the risk shifts to your bookkeeping. When the IRS receives fewer information returns, your own records become the primary evidence for your deductions. A contractor payment with no 1099 and no invoice, no W-9, no check image, and no clear description in your books is a deduction with nothing behind it.
Put differently: the paperwork you send to the IRS got lighter. The paperwork you keep in your own files should not.
Your checklist before January
Run this in October or November, not the last week of December.
- Pull a vendor payment report for the year to date. Sort by total paid. Identify everyone at or above $2,000, and everyone close enough that year-end payments could push them over.
- Audit your W-9 file. One folder, one row per vendor. Any vendor without a signed W-9 goes on a call list this week.
- Verify legal names and TINs. A mismatch between the name and the taxpayer ID triggers an IRS notice and possible backup withholding. Match the W-9 exactly — including whether the payee is an individual, a single-member LLC, or a corporation.
- Confirm which vendors are exempt. Payments to most corporations generally do not require a 1099-NEC, but attorneys are a well-known exception. Do not guess from a business name; the W-9 tells you the entity type.
- Separate reimbursements from compensation. Materials you reimbursed under an accountable arrangement are treated differently from payment for services. Mixing them inflates the reported amount and generates disputes in February.
- Reconcile payment methods. Amounts paid to a contractor through a payment card or third-party network are reported by the processor, not by you. Paying the same contractor by both check and card requires care so the same dollars are not reported twice.
- Tell your contractors what is coming. A short note in December — “you may not receive a 1099 this year because of the new $2,000 threshold; your income is still reportable” — prevents a lot of phone calls.
Frequently asked questions
I paid a contractor $1,500 in 2026. Do I file anything?
No 1099-NEC is required, because the payment is under the $2,000 threshold for 2026 payments. You still deduct the $1,500 as a business expense, you still keep the invoice and proof of payment, and you should still have the contractor’s W-9 on file.
Does the new threshold apply to my 2025 forms filed in January 2026?
The $2,000 threshold applies to payments made in 2026, which are reported on forms filed in early 2027. Forms covering 2025 payments follow the rules that were in place for 2025. Check with your preparer before applying the new number to an older year.
My payment app is not sending me a 1099-K this year. Is that income still reportable?
Yes. The 1099-K threshold returning to $20,000 and more than 200 transactions changes who has to send the form, not what is taxable. Report all business income from those platforms, whether or not a form arrives.
What happens if I skip a required 1099-NEC?
Penalties for failing to file correct information returns are assessed per form and increase the longer the form is late, so a handful of missed forms adds up quickly. Filing late is far better than not filing. If you discover a missed form, file it as soon as you can rather than waiting for a notice.
Get your vendor file clean before the deadline
January 31 arrives fast, and the fixes that take five minutes in October take five hours in late January. Jimenez Consulting Tax Services helps Clarksville business owners organize vendor records, collect W-9s, and file 1099s on time — for one contractor or fifty.
Call us at (931) 802-8620 or stop by 2225 Lowes Dr W Ste B, Clarksville, TN 37040.