For years the rule every small business owner learned was simple: pay a contractor $600 or more, send them a 1099. That rule is gone. Starting with payments made in 2026, the threshold is $2,000. It is the biggest change to 1099 filing in decades, and it lands on the forms due at the start of 2027. Here is what changed, what did not, and what to get in order before December 31.
The short version: For payments made in 2026, you file Form 1099-NEC (contractors) or 1099-MISC (rent and similar payments) only for someone you paid $2,000 or more during the year, up from $600. The threshold rises with inflation after 2026. Payment apps and card processors report on Form 1099-K only above $20,000 and 200 transactions. Forms for 2026 payments are due February 1, 2027, because January 31 falls on a Sunday. And none of this changes what is taxable: contractors still owe tax on every dollar.
What changed, side by side
| Payments made in 2025 | Payments made in 2026 | |
|---|---|---|
| 1099-NEC (contractors, freelancers) | $600 or more | $2,000 or more |
| 1099-MISC (rent, prizes, other income) | $600 or more | $2,000 or more |
| 1099-MISC royalties | $10 or more | $10 or more (unchanged) |
| 1099-K from payment apps and marketplaces | $20,000 and 200 transactions | $20,000 and 200 transactions |
| Due date to recipients and IRS (1099-NEC) | February 2, 2026 | February 1, 2027 |
The $2,000 test is per payee, per year, counting every payment you made to them. A contractor you paid $500 a month from January to April crosses it in April. One you paid $1,800 all year does not.
Who gets a 1099-NEC now
You generally file a 1099-NEC for 2026 when all four are true:
- You paid the person or business in the course of your trade or business (not personal payments, like your own house painter).
- They are not your employee (employees get a W-2).
- They are an individual, sole proprietor, partnership or LLC taxed as one. Most corporations are exempt, with exceptions below.
- You paid them $2,000 or more during 2026 by cash, check, ACH, Zelle or another direct method.
Two long-standing exceptions still apply regardless of how the payee is organized: payments to attorneys and medical and health care payments still need a 1099 even when the payee is a corporation.
How you paid matters
This is the rule that saves the most filings, and the one people get wrong most often.
- Paid by check, ACH, cash, Zelle or a bank transfer? You are responsible for the 1099-NEC if the total hits $2,000. Zelle and bank transfers are not payment platforms for 1099 purposes.
- Paid by credit card, or through PayPal or Venmo "goods and services," Square or Stripe? The platform reports those payments on Form 1099-K when its own thresholds are met. Do not also send a 1099-NEC for those payments.
A Westchester example
A landscaping company in White Plains paid these people in 2026:
| Payee | How paid | Total | 1099 needed? |
|---|---|---|---|
| Part-time helper (sole proprietor) | Zelle | $1,800 | No, under $2,000 |
| Seasonal crew lead (single-member LLC) | Check | $6,500 | Yes, 1099-NEC |
| Logo designer | PayPal goods and services | $3,000 | No, PayPal reports it |
| Office landlord (individual) | ACH | $24,000 | Yes, 1099-MISC for rent |
| Business attorney (law firm corporation) | Check | $2,500 | Yes, 1099-NEC (attorney exception) |
| Equipment supplier (C corporation) | Check | $9,000 | No, corporation, goods not services |
Under the old $600 rule, the helper would have needed a form too. That is exactly the kind of filing the new threshold removes.
What did not change
- Taxable income is still taxable. The helper who got $1,800 without a 1099 still has to report it. The threshold controls paperwork, not tax.
- Get a W-9 before the first payment. You need the payee's name, address and taxpayer ID to file, and you cannot predict in January who will cross $2,000 by December. If a payee refuses to give a valid taxpayer ID, you may be required to withhold 24% backup withholding.
- E-filing is required at 10 forms. If you file 10 or more information returns of all types combined (including W-2s), you must file electronically. The IRS IRIS portal lets small businesses e-file 1099s for free.
- Penalties still apply per form. They start around $60 per late form and climb past $300 per form for very late or missing filings, with more for intentional disregard.
- Check your state. Some states set their own 1099 rules and did not adopt the $2,000 federal threshold.
Your before-December-31 checklist
- Pull a contractor payment report for 2026 from your books, by payee, split by payment method.
- Flag everyone at or near $2,000 paid by check, ACH, cash or Zelle.
- Collect missing W-9s now, while contractors still answer your emails.
- Tag card and PayPal payments so you do not double-report them.
- Decide how you will file: IRIS, your payroll provider, or your accountant, before the February 1, 2027 deadline.
If your books are behind, this is where it hurts: you cannot file accurate 1099s from a shoebox. Catch-up bookkeeping gets the payee totals right before January, and BIB Pro keeps every expense categorized going forward.
Let us handle your 1099s
London's Tax Services does monthly bookkeeping, year-end 1099 preparation and e-filing for small businesses across Westchester County, the Bronx and New York City from our office at 75 South Broadway in White Plains. We review your contractor payments, chase the W-9s, and file on time. Book a free 15-minute call or call (646) 917-7714 before the January rush.
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