Who gets a 1099-NEC, the $600 vs. $2,000 threshold change, the attorney exception, Jan 31 deadlines, penalties, and why payment-app payments aren't your job to report.
Here's the short answer: you file a 1099-NEC for each unincorporated contractor — sole proprietor, single-member LLC, or partnership — you paid $600 or more for services during 2025. Payments to corporations are generally exempt, goods don't count, and payments made through a card or payment app are reported by the processor, not you. Both copies — the contractor's and the IRS's — are due January 31.
That sounds simple until you're staring at a year of vendor payments in December trying to figure out who's a corporation, who gave you a W-9, and whether the $4,000 you paid your web designer went through your bank account or PayPal. If your books are behind, sorting this out is exactly the kind of job covered in our catch-up bookkeeping playbook — 1099 season is the deadline that forces the cleanup.
This guide walks through who gets a form, who doesn't, the threshold change coming for 2026 payments, and the penalties that make January 31 a date worth respecting.
For payments made in 2025, the trigger is $600 or more paid during the calendar year to a single payee for services performed for your business. That includes your freelance designer, your bookkeeper, the handyman who repairs your storefront, your marketing consultant, and the developer who built your app — if they operate as a sole proprietorship, single-member LLC, or partnership.
A few points that trip people up:
Under current law, the 1099-NEC and 1099-MISC reporting threshold rises from $600 to $2,000 for payments made in 2026 — those forms get filed in early 2027 — and the threshold is indexed for inflation after that.
Two practical notes. First, this filing season (forms due January 31, 2026, covering 2025 payments) still runs on the $600 rule — don't apply the new threshold a year early. Second, the reporting threshold has nothing to do with taxability. Your contractor owes tax on every dollar you pay them whether or not a form gets filed, and you deduct every legitimate dollar whether or not it hit the threshold.
Payments to C corporations and S corporations are generally exempt from 1099-NEC reporting. This is why the W-9 matters: the entity-type box tells you whether a payee is off the hook. An LLC is not automatically exempt — an LLC taxed as a sole proprietorship or partnership gets a 1099; an LLC that elected S corp or C corp status generally doesn't.
The big exception: attorneys. Payments of $600 or more for legal services get reported even when the law firm is incorporated. Congress specifically carved lawyers out of the corporate exemption, so your incorporated business attorney still gets a form.
You can't file an accurate 1099-NEC without the contractor's taxpayer identification number, and the W-9 is how you collect it. Best practice is to get the W-9 before the first payment — once the contractor has been paid in full, your leverage is gone.
If a contractor refuses to provide a W-9, the IRS's answer is backup withholding: you withhold 24% from their payments and send it to the IRS. On a $10,000 invoice, that's $2,400 held back. Most contractors produce a W-9 quickly once they understand the alternative. The mechanics of collecting W-9s, handling TIN mismatches, and running backup withholding get their own full treatment in our W-9 and backup withholding guide.
January 31 is the deadline for both copies — the recipient copy to your contractor and the IRS copy. Unlike some information returns, the 1099-NEC has no later IRS filing date; everything lands on the same day, right when W-2s are due for employees. (If you have payroll too, the same-day crunch is one more reason the systems in our payroll tax guide for small employers pay off in January.)
Miss the deadline and penalties tier by how late you are:
The amounts adjust annually, but the structure is what matters: penalties apply per form, and they can apply twice per contractor — once for the late IRS copy, once for the late recipient copy. Ten missed contractors can add up fast.
Also: if you file 10 or more information returns in total across all types — 1099s, W-2s, and the rest combined — you're required to e-file. Paper forms from an office-supply store won't cut it for most businesses anymore. The IRS's free IRIS portal or your accounting software handles this.
If you paid a contractor by credit card, debit card, or a payment-app business transaction (think card-style processing, not a personal transfer), you do not issue a 1099-NEC for those payments. The payment processor reports them on a 1099-K. This rule exists to prevent double reporting — the IRS doesn't want the same $8,000 showing up on your 1099-NEC and the processor's 1099-K.
For reference, the 1099-K threshold is back to $20,000 and 200 transactions after the OBBBA reversal. But the threshold isn't your concern — the split is. Checks, cash, ACH, and wire transfers are yours to report; card and payment-app processing belongs to the processor. If you paid a contractor $3,000 by check and $4,000 by card in 2025, your 1099-NEC shows $3,000.
This is where clean books earn their keep: your ledger needs to distinguish payment methods per vendor, or you'll either over-report or spend a weekend reconstructing it from bank statements. If categorizing vendor payments by method sounds like more than you want to own, that's a core piece of what a monthly bookkeeping service does quietly in the background all year.
The 1099-NEC test in one line: $600 or more (2025), for services, to an unincorporated payee or any attorney, paid by check, cash, or bank transfer — filed by January 31.
1099-NEC filing is a vendor-data problem disguised as a tax form. Collect W-9s before you pay anyone, keep payment methods straight in your books, and January becomes a report you run instead of a crisis you manage. Taxagon's CPAs and EAs prepare and e-file 1099s for business clients every January — if you'd rather hand off the whole vendor cleanup, reach out.
This article is general information, not tax advice for your specific situation. Tax law changes; figures are for the years stated.
Talk it through with a licensed US tax professional — we'll tell you honestly whether it applies to your situation.
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