1099-NEC Threshold: Which Contractors Get One, LLCs and Cards

Who gets a 1099-NEC, and what is the threshold now?

A business generally sends a Form 1099-NEC to each person it paid $2,000 or more during the calendar year for services, when that person is not its employee (IRS instructions). The test is "or more": a contractor paid exactly the threshold gets a form (26 U.S.C. 6041).

Many sources still show $600; that figure applies to payments made before 2026 (IRS FAQ).

Backup withholding is the exception: if you withheld federal income tax from a contractor, you file a 1099-NEC for that contractor at any amount (IRS).

All four conditions must be met (IRS instructions):

1. You paid someone who is not your employee.
2. The payment was for services in the course of your trade or business (nonprofits and government agencies count too).
3. The payee is an individual, a partnership or an estate, or a corporation that falls under an exception below.
4. You paid that payee the threshold or more during the year.

The threshold is the easy part. A contractor that is an LLC, a missing W-9, payments made by card or app, a worker who may really be an employee, and earlier years that were never filed are what make a case harder. Before January, gather a list of everyone you paid for services, each person's total by calendar year, how each payment was made, and each contractor's W-9. If you paid many vendors, have no W-9s or yearly totals, or earlier years went unsent, that list has to be rebuilt from your bank and card records; the last section, Different for you?, says where to start.

Do I send a 1099-NEC to a contractor that is an LLC?

It depends on how the LLC is taxed, not on the letters "LLC". Read line 3a of the contractor's Form W-9: a disregarded single-member LLC (one owner, treated by the IRS as part of that owner) checks the box for its owner's classification, and any other LLC checks "LLC" and enters its own code (C, S or P).

A disregarded LLC owned by a corporation shows a corporation on line 3a. If line 3a is blank or inconsistent, ask for a corrected W-9. A trust, an estate or an "Other" entity is not covered by this table and may need professional review.

Do I send a 1099-NEC to a contractor that is a corporation?

Generally no. Payments for services to a corporation, including an LLC treated as a C or S corporation, usually need no 1099-NEC (IRS instructions).

Legal services are the exception. Attorneys' fees are reportable on Form 1099-NEC at the threshold even when paid to a law firm that is a corporation, and settlement money paid to an attorney rather than as a fee goes on Form 1099-MISC. Medical and health care payments to a corporation are also reportable, on Form 1099-MISC (Pub. 1099).

Do I send a 1099-NEC if I paid by credit card, debit card or a payment app?

Generally no 1099-NEC for payment card or third-party network payments. They fall under the processor's Form 1099-K reporting rules, and the business that paid does not file a 1099-NEC for them (IRS instructions; Regulations section 1.6041-1). This holds even when the processor's own threshold is not met, because the IRS disregards that threshold when deciding which form applies (Instructions for Form 1099-K).

Checks, cash and transfers sent from your bank account straight to the contractor (ACH or wire) are not card or network payments, so you report them. When one contractor is paid by several methods, count every payment that is not a card or payment-network payment toward your total, and leave out the ones a processor reports. Whether an app payment is a network payment depends on how the app settles it, so keep the method on every payment and ask the app or your accountant when unsure.

Which payments generally do not need a 1099-NEC?

Personal payments, pay to employees, payments for goods and most payments to corporations generally do not need a 1099-NEC (IRS instructions).

• Employees: wages, bonuses, prizes and awards go on Form W-2, and business expense reimbursements to employees are not reported on a 1099-NEC.
• Personal payments: only payments made in the course of a trade or business are reportable.
• Goods: payments for merchandise, freight, storage, telephone and similar items. Parts and materials a contractor supplies as part of a service do count.
• Tax-exempt organizations and governments: payments to a tax-exempt organization, the United States, a state, or a foreign government.
• Rent: not reported on Form 1099-NEC. Rent for business space or equipment paid to the owner is generally reported on Form 1099-MISC instead, which has its own threshold. Rent paid to a real estate agent or property manager needs no form from you, because they report what they pay over to the owner (IRS instructions).
• Totals below the threshold, unless you withheld backup withholding.

How do I add up what I paid one contractor?

Add everything you paid the same payee in the calendar year, counted by the date you paid, not the invoice date or the project dates (Regulations section 1.6041-1 ties reporting to payments you make during the calendar year). Compare the total with the threshold for that year.

What counts toward the total (IRS instructions):

• Fees, commissions and other pay for services.
• Parts and materials the contractor supplied when that was incidental to the service, for example a repair bill showing labor and parts.
• Travel reimbursements the contractor did not account for to you.
• State or local sales tax imposed on the service provider and paid to them. Sales tax imposed on you as the buyer and collected from you stays out.

Report a sole proprietor under the individual's name; a business name goes on the second name line, never alone (Pub. 1099). Leave out payment-card and third-party-network payments, whether or not the processor files a Form 1099-K.

What should my books hold during the year so January is a report?

Each contractor needs a vendor record with five facts captured before the first payment, so the January list comes from a report rather than a search. The IRS suggests asking every US payee for a Form W-9 (Pub. 1099).

If you pass customers' tips on to a contractor, record them separately: the form shows cash tips in box 1b and the tipped occupation code in box 1c, besides the total in box 1a (IRS instructions).

In December, run payments by vendor, by method, for the calendar year. Compare each total with the threshold and chase any missing W-9 while the contractor is still reachable. Keep copies of filed forms for at least 3 years, or 4 if backup withholding was imposed (Pub. 1099).

When is the 1099-NEC due, and does my state want a copy?

The IRS copy and the contractor's copy are both due January 31 after the payment year, moving to the next business day when that date is a weekend or legal holiday (Pub. 1099). For payments made in 2026 the due date is February 1, 2027. Form 1099-NEC has no automatic extension.

A late or incorrect form carries a penalty per form, separately for the IRS copy and for the contractor's copy, and the amount rises the longer the failure goes uncorrected (IRS). For amounts, missed deadlines, notices and corrections, see late 1099s and W-2s.

State rules are separate. The form's state boxes are for your convenience and need not be completed for the IRS; if a state wants a paper copy, Copy 1 goes to the state tax department (IRS instructions). Check your state tax agency. California, for example, separately requires a report to its EDD (form DE 542) for individual, sole-proprietor and single-member-LLC contractors, within 20 days of paying $600 or more or of contracting for that much, whichever is earlier, when a federal 1099 is also required (California EDD).

How do I e-file 1099-NEC forms, and is there a free way?

Yes, free e-filing exists. The IRS Information Returns Intake System (IRIS) Taxpayer Portal is free: enter forms by hand or upload a CSV, file up to 100 returns at a time, and download the contractor copies (IRS: IRIS). Beginning with the 2026 tax year, IRIS is the IRS's only system for e-filing information returns (Pub. 1099).

• Apply early. IRIS needs a Transmitter Control Code (TCC), the IRS code that lets you e-file. An EIN is required to apply, and the IRS gives the processing time as up to 45 days in one place and 45 business days in another (Pub. 1099). A sole proprietor with no EIN needs one first.
• E-filing is required at 10 or more. Count the original information returns you must file in the year, of all types together, W-2s included; corrections do not count toward the 10. If the originals had to be e-filed, so must any corrections. A partnership with more than 100 partners must e-file at any count (Pub. 1099; IRS; Regulations section 301.6011-2). A hardship waiver is requested on Form 8508, at least 45 days before the due date (Pub. 1099).
• Under 10, paper is allowed. Use the IRS-printed Copy A with Form 1096, the cover form for paper returns. Copy A and Form 1096 printed from the IRS website cannot be filed, because the IRS scans paper forms (IRS; General Instructions).
• Give the contractor a copy. The IRS site has fillable PDF copies to give the contractor (IRS instructions). Electronic delivery is allowed only if the contractor consented in the required way (Pub. 1099).

What if the worker should have been an employee, or I never collected a W-9?

A 1099-NEC does not make a worker a contractor. The IRS weighs behavioral control, financial control and the type of relationship, not the form you issued. If you had no reasonable basis for treating an employee as a contractor, you may owe employment taxes for that worker (IRS). Relief under section 530 has its own requirements, including filing all required information returns on a basis consistent with how you treated the worker (IRS). The Voluntary Classification Settlement Program (Form 8952) asks for all required 1099s for the previous three years (IRS). See workers who may be employees, which also covers who can owe those taxes personally.

Without a W-9 you cannot tell whether a contractor is a corporation or what tax ID to report. Ask for one now. If a contractor will not give a tax ID, backup withholding at 24% can apply to payments for services, and if you do not collect and pay it over you may become liable for the uncollected amount (Pub. 1099); see collecting tax IDs from contractors.

Example

All figures are in US dollars and are illustrative.

A sole proprietor pays a freelance photographer

A design studio run as a sole proprietor pays a freelance photographer, an individual, by check.

• 2025: $900. The threshold for 2025 payments was $600, so a 1099-NEC was due for that year. If it was never sent, see late 1099s.
• 2026: $3,000. The total is above the $2,000 threshold, so the studio sends a 1099-NEC. Had it paid $1,500 and withheld nothing, no 1099-NEC would be due for that year.

An S corporation pays an LLC

An S corporation pays an HVAC company set up as an LLC $8,000 by check for repairs, parts included. The company's W-9 shows an LLC taxed as a partnership, so the S corporation sends a 1099-NEC for the full $8,000. If the W-9 had shown an LLC taxed as a C or S corporation, the S corporation generally would not send one.

A freelancer is paid through a payment app

An owner pays a freelancer $4,000 through a payment app that settles payments over its own network. Those payments fall under the app's own Form 1099-K reporting rules, so the owner sends no 1099-NEC for them. Had the owner paid the same $4,000 by check or bank transfer to a freelancer who is an individual, the owner would send one.

Different for you?

• You paid several contractors, and your vendor records lack W-9s, entity types, payment methods or yearly totals: the vendor list has to be rebuilt from your bank and card records. That is bookkeeping work, and it lets the January list come from a report instead of a search.
• Earlier years' 1099s were never sent: see late 1099s and W-2s for deadlines and penalties. Each missed year's totals are rebuilt the same way, from bank and card records.
• A contractor will not give a W-9 or tax ID: see collecting tax IDs from contractors.
• A worker may really be an employee: see workers who may be employees and the cost of an employee versus a contractor.
• The contractor is outside the US: a W-9 certifies US status, so see paying contractors abroad.
• You paid a subcontractor in cash with no receipt: see paying subcontractors in cash.
• You pay cleaners or handymen for a rental: see contractor forms for landlords.