Form 1099-NEC: Contractor Reporting
Annual reporting of non-employee compensation of $2,000+ paid to independent contractors (payments made after 31 December 2025; the threshold was $600 before, and is indexed to inflation from 2027). Issuer must send 1099-NEC to recipient AND IRS by 31 January following the calendar year. Applying the $2,000 threshold means counting only payments for services during the calendar year, and the threshold applies to payments made after 31 December 2025.
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Who this applies to
- Any business that paid an independent contractor $2,000+ in a calendar year (payments made after 31 December 2025)
- Includes sole proprietors, LLCs, partnerships, corps making payments
- Excludes payments to corporations (with limited exceptions for legal/medical)
What to file
Form 1099-NEC for each recipient with their name, address, TIN (from Form W-9), and total non-employee compensation. Form 1096 transmittal for paper filers.
How to file
E-file through the IRS IRIS system or a payroll or accounting provider (mandatory when a business files 10 or more information returns in a year). The IRS is retiring FIRE, and IRIS becomes the only intake system from the 2027 filing season. Paper accepted under 10 forms. Many payroll/accounting platforms file directly.
Payment due
No payment: informational return only.
Penalties for missing this deadline
Tier-based penalties for 2026: $60 per form if filed within 30 days, $130 from 31 days late through 1 August, $340 after 1 August or not filed, and $680 for intentional disregard with no cap. The same charges apply to each return and to each payee statement.
Filing checklist
- Collect W-9 from every contractor at start of engagement
- Aggregate annual payments per contractor (only count non-employee compensation, not reimbursements)
- Determine if contractor is corporation (most are exempt) or sole prop/LLC (1099 required)
- Generate 1099-NEC for each $2,000+ recipient
- File with IRS and send copy to recipient by 31 January
Documents you'll need
- Form W-9 for each contractor with legal name, business type and TIN
- Payment records by calendar year with invoices
- Records of any backup withholding and Form 945
- State filing requirements, since several states ask for a copy
Common mistakes to avoid
- Missing the 31 January deadline (much earlier than other forms)
- Not collecting W-9 upfront (chasing TINs in January is brutal)
- Issuing 1099 to corporations unnecessarily (they're exempt unless legal/medical)
- Misclassifying employees as contractors (huge IRS penalty exposure)
- Skipping backup withholding when a contractor refuses to provide a TIN: the payer must withhold at 24% and report it on Form 945
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AccountsOS tracks every Internal Revenue Service (IRS) and State Secretary of State (varies by state) deadline and reminds you weeks ahead.
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