Paying contractors: W-9s, the 1099-NEC, and the 2026 threshold

If your business pays someone who is not an employee, you may owe them and the IRS a Form 1099-NEC. The amount that triggers it went up for payments made from 2026 onwards.

What changed for 2026

The instructions put it as a tax-year rule: for tax years that begin after 2025, the minimum amount that triggers reporting on certain information returns, and backup withholding on those same payments, went up, and it may be adjusted for inflation from 2027. Set the two years side by side: a payment made in 2025 is reportable at $600 or more, and a payment made in 2026 at $2,000 or more.

One sentence prevents most of the confusion that follows. The threshold that applies is the one for the year the payment was made, not the year you sit down to file. A business filing in early 2026 for what it paid during 2025 uses the older, lower amount, and gets to use the higher one a year later.

Who gets a 1099-NEC

File a form for each person your business paid during the year, at or above that year's threshold, where the payment was for services done by someone who is not on your payroll, parts and materials supplied with the work included, or where it was a payment to an attorney. You also file one for anyone from whom you withheld federal income tax under the backup withholding rules, whatever the amount.

Two exclusions settle most of the arguments. Payments to corporations are generally outside the requirement, although there are named exceptions and attorneys' fees is the one small businesses run into most often. And payments made by credit or payment card, or through a third-party network, belong on a Form 1099-K, filed by the payment settlement entity rather than by you, so the cleaner you pay through a card processor is not yours to report. Form 1099-K and the 1099-K thresholds cover that side.

Collect the W-9 first

Form W-9 is how a payee gives you their correct taxpayer identification number, and everything else rests on it. Make it a condition of the first payment rather than a January chore: no W-9, no check. Keep it with the vendor record, and ask for a fresh one when a business changes its name or its entity.

This is not paperwork for its own sake. Without a correct name and number you cannot file a correct form, a penalty can apply to a form filed late or with the wrong number, and the fallback the law hands you is more work for you than for the contractor.

Backup withholding, the fallback nobody wants

When a payee has failed to give you a correct taxpayer identification number, you are required to withhold at the current rate, 24%, from future payments to them. There are two programs behind that. One covers the payee who never handed the payer a correct number for the information return that has to be filed. The other covers the payee who left interest and dividend income off a federal return, or understated it, or did not certify that they are not subject to withholding for that reason. Commissions, fees and other payments for work done as an independent contractor are among the payments backup withholding reaches.

Read that as the payer, because the duty lands on you. You do the withholding, you remit it, and you report it on the form. Collecting a W-9 before the first payment is how the situation never comes up.

The January deadline

Form 1099-NEC must be filed on or before the end of January, using either paper or electronic filing. If that date falls on a Saturday, Sunday or a legal holiday, the due date moves to the next business day. For payments made during 2025, that lands on February 2, 2026. Form 1099-MISC is filed with the IRS later than the 1099-NEC, which is the main reason the two get mixed up.

The work that makes January calm happens in December. Pull the vendor list, mark everyone who crossed the threshold for that payment year, check that a signed W-9 sits behind each of them, and chase the missing ones while there is still time to chase them.

Getting it wrong, and fixing it

A form with the wrong number or the wrong amount is corrected, not ignored. Two checks before anything goes out. First, the name and taxpayer identification number exactly as they appear on the W-9, since that is what the IRS matches against. Second, the box the payment belongs in, because the IRS uses the box to work out whether the recipient reported the payment properly, and a payment in the wrong box can produce a notice for a contractor who did nothing wrong.

Form 1099-NEC covers what the recipient does with the form when it reaches them, and Schedule C is where the payments you made come off your own return as a business expense.