A real estate brokerage must issue Form 1099-NEC to any independent contractor agent it paid $2,000 or more in commissions, referral fees, or bonuses during the calendar year, with copies furnished to the agent and filed with the IRS by January 31 of the following year. That $2,000 floor takes effect for tax year 2026, replacing the long-standing $600 threshold, and will adjust for inflation starting in 2027.1Internal Revenue Service. 2026 Publication 1099 (Draft) The 1099 for real estate commissions is the brokerage’s reporting obligation, not the agent’s, and missing it carries per-return penalties that climb the longer the form goes unfiled.
When a Brokerage Owes a 1099-NEC
Three conditions have to line up. The recipient is not an employee of the brokerage. The payment happens in the course of the brokerage’s trade or business. And total payments to that one person or entity reach $2,000 or more for the year.2Office of the Law Revision Counsel. 26 U.S. Code 6041 – Information at Source
The threshold is aggregate. A brokerage that pays one agent $1,500 in commissions and $600 in referral bonuses has hit $2,100 and owes a 1099-NEC. If the agent is classified as an employee rather than an independent contractor, the payment belongs on a W-2 instead, regardless of whether the compensation is pure commission. Misclassifying an employee as a contractor doesn’t shift the form; it just creates a back-tax problem.
What the 2026 Threshold Change Actually Changes
For most brokerages with full-time producing agents, not much. Active agents typically clear $2,000 in annual commissions without effort, so they will still receive a 1099-NEC. The change matters for agents who close only a deal or two, for small referral fees paid to outside agents, and for new agents who join late in the year. Payments to those recipients that would have triggered a 1099 under the old $600 rule may now fall below the reporting line. The income is still taxable to the agent either way; the brokerage’s filing duty is what shifts.
Pay Date, Not Closing Date
The 1099-NEC follows when the money was disbursed, not when it was earned. A commission from a December 2025 closing that is paid out in January 2026 goes on the 2026 form.3Internal Revenue Service. Publication 538 – Accounting Periods and Methods Track disbursement dates in your ledger, not closing dates, or you will miscount every January.
Get the W-9 Before You Pay
Before cutting the first commission check, collect a signed Form W-9 from every independent contractor agent.4Internal Revenue Service. About Form W-9, Request for Taxpayer Identification Number and Certification The W-9 gives you the agent’s legal name, taxpayer identification number, and tax classification. That last piece decides whether the corporate exception applies.
Verify that the name and TIN match IRS records. If they don’t, the IRS sends a CP2100 or CP2100A notice, and the brokerage has to contact the agent to resolve it. Unresolved mismatches, or agents who never provide a TIN, trigger backup withholding: the brokerage must withhold 24% of every future commission payment and remit it to the IRS using Form 945.5Internal Revenue Service. Backup Withholding6Internal Revenue Service. About Form 945, Annual Return of Withheld Federal Income Tax Any amount withheld under this rule also gets reported in Box 4 of the agent’s 1099-NEC so the agent can claim credit for it.
Chasing W-9s in January while you’re trying to file is avoidable. Make signed W-9s a contract-signing requirement.
Which 1099 Form to Use
Commissions paid to independent contractor agents go on Form 1099-NEC, Box 1, “Nonemployee compensation.”7Internal Revenue Service. About Form 1099-NEC, Nonemployee Compensation Two neighboring forms cause confusion:
- Form 1099-MISC covers non-service payments such as rent paid to a landlord, prizes, and royalties. A property management arm that pays rent to owners uses 1099-MISC for that rent and 1099-NEC for agent commissions.8Internal Revenue Service. About Form 1099-MISC, Miscellaneous Information
- Form 1099-S reports the gross sale price of the property and is filed by the closing or settlement agent, not the brokerage. It’s a separate obligation with a separate purpose.9Internal Revenue Service. Instructions for Form 1099-S
The Corporate Exception
Payments to C-corporations and S-corporations are generally exempt from 1099-NEC reporting.10Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC If a cooperating brokerage or a solo agent’s business is set up as a corporation and says so on its W-9, no 1099-NEC is required. Sole proprietors, partnerships, and single-member LLCs taxed as disregarded entities remain reportable. Payments for legal services to an attorney are reportable even when the attorney is incorporated, so a brokerage paying its closing attorney should not assume the corporate exception applies there.
Split Commissions Between Brokerages
When a listing brokerage splits a commission with a cooperating brokerage, the listing brokerage is generally the one that files the 1099-NEC on the cooperating broker’s share. That holds even when escrow cuts the co-op check directly to the other broker, because the funds come out of the listing broker’s commission.2Office of the Law Revision Counsel. 26 U.S. Code 6041 – Information at Source The cooperating brokerage then files its own 1099-NEC to its agent if that agent is an independent contractor over the threshold. Reporting follows the money at each level.
Reimbursed Expenses
If a brokerage reimburses an agent for travel, marketing, or other business costs without requiring an accounting of the expense, the reimbursement is treated as additional compensation and must be added to the agent’s Box 1 amount.10Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC Reimbursements paid under an accountable plan, where the agent submits receipts and documents the business purpose and the brokerage reviews them, are treated differently and may be excludable from the 1099. If your brokerage reimburses expenses at all, put an accountable plan in writing and require receipts.
Filing Deadlines and How to File
Both the recipient copy and the IRS copy of Form 1099-NEC are due by January 31 of the year after payment. There is no extension for this deadline, and it applies to paper and electronic filings alike.11Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
Any filer submitting 10 or more information returns of any type in the year (all 1099s and W-2s counted together) must file electronically.12Internal Revenue Service. E-File Information Returns Most brokerages hit that number without trying. The IRS is moving filers from its legacy FIRE system to the newer Information Returns Intake System (IRIS), with FIRE targeted for retirement after the 2026 filing season, so a brokerage still on FIRE should plan the transition now.13Internal Revenue Service. Filing Information Returns Electronically (FIRE)
Brokerages eligible to file on paper send Copy A of each 1099-NEC with Form 1096 as a transmittal.14Internal Revenue Service. About Form 1096, Annual Summary and Transmittal of U.S. Information Returns Copy A has to be an official scannable form; photocopies and pages printed from the IRS website are generally not accepted, though a limited online fillable version exists for very low-volume filers.15Internal Revenue Service. General Instructions for Certain Information Returns
State Filing
Many states also want a copy. States participating in the Combined Federal/State Filing Program receive electronically filed returns automatically from the IRS at no cost, which may satisfy the state obligation.16Internal Revenue Service. Topic No. 804, FIRE System Test Files and Combined Federal/State Filing (CF/SF) Program States that do not participate, or that require direct filing when state tax has been withheld, need a separate submission. Confirm the rule with your state tax agency.
Penalties for Late or Missing Filings
Miss the January 31 deadline or file with wrong information and per-return penalties apply, on a sliding scale based on how quickly you fix it. For tax year 2026:17Internal Revenue Service. Information Return Penalties
- Corrected within 30 days: $60 per return
- Corrected after 30 days but by August 1: $130 per return
- Filed after August 1 or not filed at all: $340 per return
- Intentional disregard: $680 per return
Each tier carries an annual cap, with lower caps for small businesses, except the intentional-disregard tier, which has no cap. A brokerage with 50 contractor agents that skips filing entirely is looking at $17,000 in penalties before any interest.
Fixing an Error After You’ve Filed
Wrong dollar amount: prepare a new 1099-NEC with the correct figure, check the “CORRECTED” box at the top, and send it to the IRS with a new Form 1096. Do not attach the original.15Internal Revenue Service. General Instructions for Certain Information Returns
Wrong recipient name or TIN: two steps. First, a corrected return that zeroes out the original, showing the wrong recipient’s information with $0 in every dollar field and the “CORRECTED” box checked. Second, a brand-new return (no “CORRECTED” box) with the correct recipient and the actual payment. Note “Filed To Correct Name” in the bottom margin of the Form 1096 that accompanies the second filing.
If the original filing was electronic, the correction has to be electronic too. Fix errors as soon as you spot them; the penalty tiers reward speed.
Records to Keep
Keep copies of filed 1099-NEC forms and supporting documentation for at least three years from the return’s due date, extending to four years if any backup withholding was involved.15Internal Revenue Service. General Instructions for Certain Information Returns Hold signed W-9s at least as long as the returns they support, and longer if the agent relationship is still active. The W-9 is your evidence that the agent certified the TIN and classification you relied on.
For Agents Receiving a 1099-NEC
Income on a 1099-NEC is subject to self-employment tax of 15.3%, covering both the Social Security (12.4%) and Medicare (2.9%) shares that an employer would otherwise split with a W-2 employee, on top of regular federal and state income tax.18Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) Agents who expect to owe $1,000 or more for the year need to make quarterly estimated tax payments.19Internal Revenue Service. Estimated Taxes Setting aside roughly 25% to 30% of each commission check is a reasonable starting point, adjustable to actual income and deductions.
If a brokerage does not issue a 1099-NEC because payments came in under $2,000, the commission income is still taxable and still has to be reported. The form is a reporting obligation on the brokerage; it does not decide whether the money counts.