If you pay independent contractors, you may need to file Form 1099-NEC for each of them after year end. The rules changed for 2026, and businesses that wait until January to sort it out often end up chasing W-9s and rebuilding payment records under deadline pressure.
The 2026 change: a $2,000 threshold
For payments made in 2026, a Form 1099-NEC is generally required when you pay a contractor $2,000 or more during the year, up from $600. The One Big Beautiful Bill Act made the change, and the threshold is set to adjust for inflation from 2027. Payments made in 2025 still use the $600 threshold.
A higher threshold means fewer forms, but it does not remove the need to track contractor payments. You still have to know who crossed the line.
What to do all year
- Collect a Form W-9 before the first payment. It gives you the contractor's legal name, address, tax classification and taxpayer identification number. If a contractor won't provide one, backup withholding rules may apply from the first payment.
- Record contractor payments in a consistent way. Use a dedicated expense account or vendor tag so payments are easy to total at year end.
- Watch how you pay. Payments made by credit card or through payment apps like PayPal are generally reported by the payment company on Form 1099-K, not by you on a 1099-NEC. Bank transfers, checks and cash payments are yours to report.
- Check the total in the fall. Review each contractor's year-to-date payments in October or November, while there is time to request missing W-9s.
- File by January 31. Form 1099-NEC is due to both the IRS and the contractor by January 31 of the following year.
Common mistakes
- Paying a contractor for months without a W-9 on file
- Recording contractor payments in general expense accounts, making them hard to total
- Issuing 1099s for payments that were made by card, which double-reports them
- Treating someone as a contractor when the working relationship looks like employment; ask your CPA if you're unsure
Every SalBooks plan includes 1099 contractor payment tracking through the year. We also offer 1099 preparation and filing support as an add-on.
This article is general information, not tax advice. Rules change; confirm current requirements with the IRS or your CPA.