Key takeaways
- For payments made in 2026, the federal 1099-NEC reporting threshold is $2,000. It was $600 for payments made before 2026 (IRS).
- The threshold is indexed to inflation for calendar years after 2026 (IRS Internal Revenue Bulletin 2026-19).
- Collect a W-9 from every subcontractor before the first payment, whether or not the sub is likely to reach $2,000.
- A 1099 is a tax reporting form. It does not settle whether a worker is an independent contractor under New Jersey's ABC test.
This guide is general information, not legal or tax advice. Ask a CPA or tax preparer how these rules apply to your business.
What Changed for 2026
For years, a contractor who paid a subcontractor $600 or more in a calendar year for services had to file Form 1099-NEC. That figure has now changed. The IRS states it plainly: "For payments made before 2026, the reporting threshold is $600. For payments made in 2026, the reporting threshold is $2,000." For payments made after 2026, the IRS directs filers to Publication 1099 for the inflation-adjusted threshold.
The change comes from section 70433 of the One Big Beautiful Bill Act. The IRS bulletin describes it this way: section 70433(a) raised the $600 threshold in section 6041 to a base threshold of $2,000 for payments made after December 31, 2025, and section 70433(b) added section 6041(h), which indexes the base threshold to inflation for calendar years after 2026. The IRS instructions for Forms 1099-MISC and 1099-NEC and Publication 1099 both carry the same "What's New" item.
For a contractor with a handful of subs, the practical effect is fewer small forms. A sub you paid $1,500 for a one-off tile job in 2026 falls under the new threshold. The same job in 2025 would have triggered a form.
Which Payments Count
The IRS says to file Form 1099-NEC when you pay, as part of your trade or business, a payment exceeding the reporting threshold during the year for "services performed by someone who is not your employee (including parts and materials)." Note the wording: the IRS page says "exceeding" the threshold. If your sub's total for the year is close to $2,000, have your preparer confirm how the line is drawn.
Several points matter for contractors in particular:
- Parts and materials are included. If a sub bills you for labor and materials on one invoice, the IRS wording covers both.
- Payments by card are treated differently. The IRS instructions say payments made with a credit card or payment card, and certain other third-party network transactions, are reported on Form 1099-K by the payment settlement entity and are not reported on Form 1099-NEC (IRS instructions).
- Employees are different. Wages paid to employees go on a W-2, not a 1099. That is why classification matters, covered below.
- Add up the whole year. The threshold applies to what you paid a payee during the year, not to a single invoice.
Do You Still Need a 1099 for an LLC?
It depends on how the LLC is taxed. The IRS instructions list payments to a corporation, including an LLC that is treated as a C or S corporation, as generally exempt from Form 1099-NEC reporting, with exceptions such as legal services (IRS instructions). The IRS also notes that you are not required to file if the payment was made to another business that is incorporated, and the payment is not for medical or legal services.
The key phrase is "treated as" a corporation. An LLC that is not treated as a C or S corporation is not covered by that exception, so do not assume every LLC is exempt. Form W-9 is where a sub states its tax classification, so getting one from every sub lets you or your preparer decide how each payee is handled.
Why the W-9 Still Matters
The higher threshold does not remove the need for paperwork at the start of a job. The IRS says Form W-9 is used to provide a correct taxpayer identification number to a person who is required to file an information return, and that a payer may request it when it needs to report income paid (IRS Form W-9 page).
The risk of skipping it is backup withholding. The IRS says a payer must withhold at a flat 24% rate when the payee does not give a taxpayer identification number in the required manner (IRS Tax Topic 307). The IRS instructions also say persons who have not furnished their TINs are subject to withholding on reportable payments. If a sub has refused to give you a W-9 and then crosses the threshold, you are the one holding the problem.
A simple rule works for most small contractors: no W-9, no first payment. It costs nothing, and it is far easier to ask on day one than in January.
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Tracking Who You Paid and When?
If you run payroll for employees and pay subs separately, a payroll platform can keep that history in one place. Gusto says its integrated contractor payments include an automated 1099 e-file service, and its help center says you can use it to pay contractors even if you do not run employee payroll with it. Check current features and pricing on its site before you decide.
See Gusto payroll options →Deadlines and Penalties
The IRS instructions say that section 6071(c) requires Form 1099-NEC to be filed on or before January 31, by paper or electronically. They also say that if a due date falls on a Saturday, Sunday, or legal holiday, the due date moves to the next business day. For payments made in 2026, January 31, 2027 is a Sunday, so the working deadline should be Monday, February 1, 2027. Confirm with your preparer.
The IRS information return penalty page, last reviewed October 15, 2026, lists these per-return amounts for returns due in 2026:
| Timing | Penalty per return (due in 2026) |
|---|---|
| Up to 30 days late | $60 |
| 31 days late through August 1 | $130 |
| After August 1 or not filed | $340 |
| Intentional disregard | $680, with no maximum |
The IRS page does not list a 2027 amount. Penalties apply for each information return or payee statement, so a contractor who missed ten subs is looking at ten separate penalties.
New Jersey Considerations
New Jersey has its own information-return rule. The NJ Division of Taxation instructions say 1099 information returns must be filed with the state by payors who are required to file federal Form 1099, when the amount paid or credited is $1,000 or more in a calendar year, or if any New Jersey income tax was withheld from the payment. The page does not mention Form 1099-NEC or independent contractors by name, so do not assume the federal $2,000 figure carries over. Ask your tax preparer how the state rule applies to the payments you make.
The bigger New Jersey issue for contractors is not the filing threshold. It is classification. NJDOL's ABC test rules (N.J.A.C. 12:11) became operative on October 1, 2026. Under NJDOL's description, the business classifying a worker as an independent contractor carries the burden of proof on all three prongs, and failing any one prong results in an employment classification (rule text).
That is why a 1099 alone offers no protection. A worker who is paid under $2,000 and receives no form is still an employee if the ABC test says so. A worker who receives a 1099 can still be an employee. Read our guides on the NJ ABC test and worker misclassification for how the prongs apply to trade businesses.
Where Insurance Fits In
The 1099 question and the insurance question often show up in the same conversation, because both turn on whether the person working for you is a real business. If a sub has no workers' compensation and an employee gets hurt, the contractor who placed the work can become liable for the injured employee's compensation under N.J.S.A. 34:15-79 (NJ Workers' Compensation Law). Our guide to subcontractor agreements and certificates of insurance covers what a certificate proves and what it does not.
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A Year-Round Checklist
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Collect a W-9 before the first payment
Get the sub's legal name, tax classification, and taxpayer identification number on Form W-9. File it with the sub's agreement.
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Keep a running total per sub
Track payments by calendar year, not by job. Include materials billed by the sub, and set aside card payments that will appear on a Form 1099-K instead.
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Review classification, not only totals
For every sub, ask the three ABC questions in plain terms: who directs the work, is it your usual line of business, and does the sub run an independent business. Fix problems with counsel before year-end.
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Calendar the filing date
Plan to give your preparer clean totals in early January so forms are ready by the Monday, February 1, 2027 date described above.
Frequently Asked Questions
What is the 1099-NEC threshold for 2026?
For payments made in 2026, the reporting threshold is $2,000, according to the IRS. For payments made before 2026 it was $600. For payments made after 2026, the IRS says to check Publication 1099 for the inflation-adjusted threshold.
When is the 1099-NEC due for payments made in 2026?
The IRS instructions say Form 1099-NEC is due on or before January 31, using paper or electronic filing. The instructions also say that if a due date falls on a Saturday, Sunday, or legal holiday, it moves to the next business day. January 31, 2027 is a Sunday, so the filing date for 2026 payments should be Monday, February 1, 2027. Confirm the date with your tax preparer.
Does the higher threshold mean I can stop collecting W-9s from subcontractors?
No. The IRS says a payer may request Form W-9 to collect a taxpayer identification number when it needs to report income paid. The IRS also says persons who have not furnished their TINs are subject to backup withholding on reportable payments. A W-9 on file before the first payment keeps your options open if a sub's payments later cross the threshold.
Do I still need to send a 1099 to a subcontractor that is an LLC or corporation?
The IRS instructions say payments to a corporation are generally exempt from Form 1099-NEC reporting, and that this includes an LLC treated as a C or S corporation, with exceptions such as legal services. An LLC taxed as a sole proprietorship or partnership is not covered by that exception. Ask each sub for a W-9, which states its tax classification.
Does a 1099 prove my subcontractor is an independent contractor?
No. Issuing a 1099 is a tax reporting step. In New Jersey, worker classification is tested under the ABC test in N.J.A.C. 12:11, which asks about control, the nature of the work, and whether the individual runs an independent business. Your tax form does not decide that question.
Does New Jersey have its own 1099 filing rule?
The NJ Division of Taxation's instructions say 1099 information returns must be filed with the state by payors who are required to file federal Form 1099, when the amount paid or credited is $1,000 or more in a calendar year, or if any New Jersey income tax was withheld. The page does not mention 1099-NEC or independent contractors specifically, so ask your tax preparer how it applies to your payments.
Last updated October 19, 2026. Sources: IRS, Am I required to file a Form 1099 • IRS, Instructions for Forms 1099-MISC and 1099-NEC • IRS, Publication 1099 (2026) • IRS, Internal Revenue Bulletin 2026-19 • IRS, Information return penalties • IRS, About Form W-9 • IRS, Tax Topic 307 backup withholding • NJ Division of Taxation, 1099 information reporting • NJDOL ABC rules announcement • N.J.A.C. 12:11 • NJ Workers' Compensation Law. General information, not legal or tax advice.