The 1099 contractor guide.
Who gets one, who does not, and why collecting W-9s in January is the hard way to do it.
This guide is general information, not tax or legal advice. Always confirm tax decisions with your CPA or tax professional.
If your business pays contractors, you may be required to file 1099-NEC forms each January. Missing the deadline comes with penalties, so here is what to know.
Who gets a 1099-NEC?
- Any individual or unincorporated business paid $2,000 or more for services during the calendar year. (This threshold was $600 through 2025 payments; it rose to $2,000 starting with 2026 payments and will adjust for inflation in future years.)
- That includes freelancers, subcontractors, and consultants. Attorneys get one even if their firm is incorporated.
One caution: paying someone as a contractor does not make them one. If a worker looks more like an employee, that is a classification question for your CPA or attorney, and it is worth asking before year-end.
Who you do NOT file for
- Payments to corporations, with exceptions for attorneys and medical providers
- Payments made by credit card or PayPal. Those fall under the payment processor’s reporting rules (Form 1099-K), not yours, so you do not file a 1099-NEC for them.
- Rent paid to a property management company. They handle it.
Before the first payment: collect a W-9
- Ask for a completed W-9 before writing the first check.
- You need their legal name, mailing address, and EIN or SSN.
- Without a W-9 on file, you may be required to withhold 24% backup withholding.
Key dates
- January 31. Send 1099-NEC copies to contractors AND file with the IRS. The same deadline applies whether you file on paper or electronically. If January 31 falls on a weekend or holiday, the deadline moves to the next business day.
Collect W-9s when you hire, not in January. For our clients, we track contractor payments all year and prepare and file the 1099s. It is one of the services we offer.
Reading this and thinking about your own books? Get a free look. It is free, and there is no catch.
Questions we get about this
What is the 1099 threshold for 2026?
It is $2,000 or more paid to an individual or unincorporated business for services during the calendar year. That threshold was $600 through 2025 payments and rose to $2,000 starting with 2026 payments.
Do I file a 1099 for someone I paid by credit card or PayPal?
No. Those payments fall under the payment processor’s reporting rules on Form 1099-K, not yours, so you do not file a 1099-NEC for them.
What if I never got a W-9 from a contractor?
Ask now rather than in January. Without a W-9 on file you may be required to withhold 24% backup withholding, and chasing someone for their tax ID after you have already paid them is considerably harder.
Want someone else to handle this?
Send us the short version of what is going on. The first look at your books is free, and you will get a straight answer on what it would take to fix.
Get a free look at your booksCall or text: 303-775-5554