Guide for contractors
1099s for contractors: the new $2,000 rule
If you pay subs, the 1099 rules changed for 2026. Here's what's different, who needs a form, and the dates that matter.
The short answer
For work paid in 2026, you send a Form 1099-NEC to each sub you paid $2,000 or more for their work. Before 2026 the cutoff was $600. The forms go to your subs and the IRS by February 1, 2027, because January 31 falls on a Sunday.
What changed
The One Big Beautiful Bill Act, signed in July 2025, raised the 1099-NEC cutoff from $600 to $2,000. It applies to payments made on or after January 1, 2026. Starting with 2027 payments, the $2,000 number will rise with inflation.
What it means for you: a sub you paid $1,500 in 2026 doesn't need a 1099. A sub you paid $2,500 does. Still get a W-9 from every sub before the first payment. In March you won't know who will cross $2,000 by December.
Who gets a 1099-NEC
Send one to each sub you paid $2,000 or more in 2026 for their work, if they are:
- A sole proprietor or independent contractor
- A single-member LLC, unless it's taxed as a corporation
- A partnership, or an LLC with more than one owner
You usually don't send one to:
- Corporations, including LLCs taxed as an S or C corporation. Attorneys and law firms are the exception: they get one either way.
- Your employees. They get a W-2.
The W-9 your sub fills out tells you which group they're in.
What counts toward the $2,000
- Counts: labor and services, including parts and materials the sub bills as part of the job.
- Doesn't count: payments by credit card, debit card, or a payment app like PayPal or Venmo. The card company or app reports those on a 1099-K, so leave them off your 1099-NEC.
- Doesn't count: materials you buy on their own from a supply house or lumber yard. Goods alone aren't reported.
Dates that matter for 2026 payments
- Before the first payment: get a signed W-9 from the sub.
- February 1, 2027: 1099-NEC due to each sub and to the IRS. January 31 is a Sunday, so the deadline moves to Monday.
Filing late means a penalty for each form, and it grows the longer you wait. If a sub won't give you their tax ID number, you may have to hold back 24% of what you pay them and send it to the IRS. That's called backup withholding. A W-9 up front avoids the whole problem.
California has its own rule
California's EDD wants to hear about independent contractors too. If you pay an individual sub (a sole proprietor or single-member LLC) $600 or more in a year, or sign a contract for that much, you report them on Form DE 542 within 20 days. The EDD still lists $600 for this, even though the federal 1099 cutoff is now $2,000. Ask your CPA how it applies to your business.
How to make January easy
- Get a W-9 before the first check.
- Pay subs from your business account, so every payment has a record.
- Record every payment in QuickBooks Online under the sub's name.
- Check each sub's total in December, not at the end of January.
This is part of the Pro and Premium packages. I track what you pay each sub all year, flag anyone missing a W-9, and file the 1099s in January. Behind on last year's books? Catch-up bookkeeping gets your sub totals right first.
Questions
No. For 2026 payments, the federal 1099-NEC cutoff is $2,000. California's EDD may still want a DE 542 report at $600, so ask your CPA.
Usually yes, unless the LLC is taxed as an S or C corporation. Their W-9 tells you.
Leave those payments off the 1099-NEC. The card company or app reports them on a 1099-K.
February 1, 2027, to each sub and to the IRS. January 31 falls on a Sunday that year, so the deadline moves to Monday.
Materials a sub bills as part of their job count. Materials you buy on their own from a supplier don't.
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Updated October 26, 2026 by Edward Felix. This is general information, not tax advice. I don't do taxes, so your CPA has the final word for your business. Sources: IRS Instructions for Form 1099-NEC and the California EDD's independent contractor reporting page.