What Is a 1099-NEC and Who Has to File One?
Sam's List Editorial | 2026-07-30
What Is a 1099-NEC and Who Has to File One? A Form 1099-NEC is an information return used to report nonemployee compensation. If you pay an independent contractor, freelancer, or other non-employee for services in the course of your trade or business, and the total for the year reaches the reporting threshold, you generally file a 1099-NEC reporting that amount to both the recipient and the IRS. That is the short answer. The details are where people get in trouble, and one of them changed for 2026. Who Has to File a 1099-NEC Three conditions generally have to be met at once. You made the payment in the course of a trade or business. This is the condition most people miss. Personal payments do not trigger reporting. Paying a plumber to fix the sink at your house is not reportable. Paying the same plumber to fix the sink at your rental property or your office generally is, because that payment is connected to a trade or business. Nonprofits and government entities are treated as being engaged in a trade or business for this purpose. The payment was for services performed by someone who is not your employee. That includes independent contractors, freelancers, gig workers, consultants, and generally attorneys. Employees get a W-2 instead, and paying a worker on a 1099 does not by itself make them a contractor. Classification depends on the facts of the working relationship, and misclassification is a separate and more expensive problem than a missed information return. The annual total reached the threshold. For payments made on or after January 1, 2026, the reporting threshold rose from $600 to $2,000, and the threshold is indexed for inflation for years after 2026. The $600 threshold still applies to payments made during 2025, which are reported on forms filed in early 2026. This is the first increase to that figure in decades, so a lot of published guidance and a lot of accounting software defaults still assume $600. Confirm the current-year figure before you rely on it. There is a separate rule with no dollar threshold: if you are required to backup withhold from a payment, the payment is generally reportable regardless of amount. What Is Not Reported on a 1099-NEC The exclusions matter as much as the rule. Payments to corporations, including S corporations and most LLCs that have elected corporate treatment, are generally excluded. The main exception is payments to attorneys, which are generally reportable even when the law firm is incorporated. Payments for medical and health care services to corporations are also reportable, though those go on a...
