The 1099-NEC threshold is $2,000 for 2026, up from $600

The threshold moved. For payments made from 1 January 2026, you file a 1099-NEC when you have paid someone $2,000 or more in nonemployee compensation during the year, and they are not a corporation. For 2025 and every year before it, the figure was $600, and it had been $600 since 1954.

The change came from section 70433 of the One Big Beautiful Bill Act, Public Law 119-21, signed in July 2025. It struck "$600" and put "$2,000" in its place in section 6041(a) of the tax code, and matched 6041A(a) to it. The first forms affected are the 2026 forms, which you file in early 2027. From payments made after 31 December 2026 the figure is indexed for inflation in $100 steps, so it will drift upward after that.

Which year you are working on decides which number applies. If you are filing in January 2026 you are reporting 2025 payments, and 2025 is a $600 year. The raise does not help you until the following January. The 1099-NEC check asks for the tax year first for that reason, and applies the threshold that belongs to it.

What did not change

Three things are commonly assumed to have moved with it and did not:

• Royalties still start at $10. That is 1099-MISC box 2, and it was not touched.
• Gross proceeds paid to an attorney still start at $600. That is 1099-MISC box 10. Fees paid to an attorney for services are a different line and follow the $2,000 NEC threshold, which means one law firm can produce two different answers depending on what the money was for.
• The deadline is still 31 January, for both the copy you send the IRS and the copy you send the recipient, with no automatic extension.

Some states set their own, lower thresholds and did not follow the federal raise. If you file state copies, check your state before you assume a payment under $2,000 needs nothing.

The rule, once you know the year

Everything difficult about January is in the words "nonemployee compensation" and "not a corporation".

What counts toward the threshold

The figure is the total for the year, not per invoice. Eight payments of $300 to the same person reaches $2,400 and needs a form for 2026, even though no single payment was close to the threshold. This is the most common miss: people scan for large payments and never total the small ones. The raise makes it easier to miss, not harder, because the running total now has further to climb before anything looks worth adding up.

Counts toward it: fees for services, commissions, prizes and awards for services, and parts supplied along with a service. Does not: goods alone, rent (that is 1099-MISC box 1), employee wages (that is a W-2), and payments made by credit card or a third-party network like PayPal, because the processor reports those on a 1099-K instead.

That last one matters more than people expect. If you paid a contractor $5,000 by card, you generally do not file a 1099-NEC for it. Filing anyway can produce a duplicate report against them.

The corporate exemption, and the two exceptions

Payments to C corporations and S corporations are generally exempt. You know which they are from the box they ticked on their W-9, which is exactly why the W-9 matters: it is your evidence for why you did not file.

Two exceptions override that, and both are expensive to miss:

• Attorneys' fees are always reportable, however the firm is incorporated. A law firm structured as a C corporation still gets a 1099-NEC.
• Medical and health care payments to a corporation are reportable, but on Form 1099-MISC box 6, not the NEC. Right obligation, wrong form.

An LLC is not a corporation

This is the single most common error. "LLC" is a state law structure, not a federal tax classification. An LLC can be taxed as a sole proprietorship, a partnership, an S corporation or a C corporation, and only the last two are exempt.

The W-9 answers it. Line 3a has an LLC box with a letter beside it: C, S or P. A P means a partnership and you file. An S or C means you generally do not. If the box is ticked with no letter, ask before you assume.

Under the threshold, and filing anyway

No form is required below the threshold. Filing one anyway is permitted and carries no penalty, and some businesses do it so their own records match what the contractor reports. It is not wrong, just not required.

The deadline has no extension

31 January, for both the IRS copy and the contractor's copy. Some information returns have an automatic extension available. The 1099-NEC does not, which is why the last week of January is the way it is.

Penalties run per form and rise with delay: $60 within 30 days, $130 by 1 August, $340 after that, for the 2025 tax year. Twenty contractors filed in September is $6,800.

Contractors filing their own paperwork face the mirror image of this problem: the same company details on every municipal form. The contractor permit filler holds them once.