1099 Form Info: Thresholds, Filing, and Penalties

To issue a 1099, collect a completed Form W-9 from the payee before you pay them, keep a running total of what you pay during the year, and if that total reaches the reporting threshold, file the appropriate 1099 with the IRS and send a copy to the recipient by the deadline. For payments made in calendar year 2026, the threshold for most 1099s jumped from $600 to $2,000 under Public Law 119-21, so fewer payments trigger a filing than in prior years.¹

Get a W-9 Before You Pay

The single most important step happens before money changes hands. Ask every vendor, contractor, or other payee to complete Form W-9. It gives you everything you’ll need at filing time:²

Legal name as it appears on the payee’s tax return
Business name if different (a DBA or LLC name, for example)
Tax classification: sole proprietor, partnership, C corporation, S corporation, trust, or LLC. This matters because payments to most corporations are exempt from 1099-NEC reporting.
Taxpayer Identification Number: a Social Security Number for a sole proprietor or an Employer Identification Number for a business entity
Current mailing address for delivering the recipient’s copy

You also need an accurate running total of what you pay each payee across the calendar year. That total is the figure you’ll report. If a contractor accounts for business travel expenses with receipts and documentation, those reimbursements generally stay out of the 1099-NEC total; unaccounted reimbursements are included if the combined fee and reimbursement reach the threshold.³

Foreign Payees Use a Different Form

If the payee is not a U.S. person, they don’t fill out a W-9. Collect Form W-8BEN from a foreign individual or W-8BEN-E from a foreign entity before you pay.⁴ Payments to foreign contractors are generally not reported on a 1099-NEC at all. U.S.-source income paid to a foreign person is reported on Form 1042-S with a companion Form 1042.⁵ Default withholding on payments to foreign persons is typically 30%, though a tax treaty can reduce or eliminate it.

Confirm the Payment Crosses the 2026 Threshold

For calendar year 2026 and beyond, the minimum that triggers a 1099 filing is $2,000 for most categories, including nonemployee compensation on Form 1099-NEC and rent, prizes, and awards on Form 1099-MISC. The threshold will be adjusted for inflation starting in 2027.¹ Some payment types keep lower thresholds: royalties and broker payments in lieu of dividends or tax-exempt interest still trigger reporting at $10 or more.⁶

A concrete example: pay a freelance graphic designer $1,800 in 2026 and you don’t file a 1099-NEC. Under the old $600 rule, you would have.

Card and App Payments Don’t Count Toward Your Threshold

If you pay a contractor by credit card, debit card, or third-party payment network like PayPal, do not include those amounts on a 1099-NEC or 1099-MISC. The payment processor reports those transactions separately on Form 1099-K.³ This is the most common source of accidental double-reporting. If you wrote a contractor two checks totaling $1,500 and also paid $1,000 through PayPal, only the $1,500 in direct payments counts toward your 1099-NEC threshold.

Pick the Right 1099 Form

Two forms cover most payers issuing 1099s to contractors and vendors:

Form 1099-NEC reports nonemployee compensation of $2,000 or more paid to independent contractors, freelancers, and other non-employees for services.⁷
Form 1099-MISC covers miscellaneous payments of $2,000 or more for rent, prizes, and awards, plus royalties of $10 or more.⁶

Other 1099s (1099-INT for interest, 1099-DIV for dividends, 1099-B for broker sales, 1099-R for retirement distributions, 1099-K for payment settlement entities) are typically issued by banks, brokers, plan administrators, or payment processors rather than by a business paying a contractor.

Watch the Rules That Trip Payers Up

Attorney Payments

The general rule that you don’t send a 1099 to a corporation has an exception for legal services. Report attorney fees of $2,000 or more on Form 1099-NEC, Box 1, whether or not the law firm is incorporated. Gross proceeds paid to an attorney in connection with a legal settlement (money that isn’t payment for the attorney’s own services) go on Form 1099-MISC, Box 10.³

Medical and Health Care Payments

Medical and health care payments to corporations are another exception to the corporate exemption. Report them on 1099-MISC, Box 6.³

When a Payee Refuses to Provide a W-9

If a contractor or vendor won’t supply a valid W-9, you’re required to withhold 24% of each reportable payment and send it to the IRS. This is backup withholding.⁸ Report and remit the withheld amounts on Form 945.⁹ The backup withholding trigger also uses the $2,000 aggregate threshold beginning in 2026.¹ You still file a 1099 for the payment even when backup withholding applies; the withheld amount goes in a separate box on the form.

Missing a W-9 also puts you at a disadvantage in an audit. The IRS expects payers to collect this information upfront, and not having it can trigger penalties for filing an incorrect information return.

File on Time, in the Right Way

Once the calendar year ends, firm deadlines apply for both the recipient copy and the IRS copy:

1099-NEC: Both the recipient’s copy and the IRS copy are due by January 31, whether you file on paper or electronically.³
1099-MISC: Recipient’s copy by January 31. IRS copy by February 28 on paper, or March 31 if filed electronically.³

If you file 10 or more information returns of any type during the year in aggregate (W-2s, 1099-MISCs, 1099-NECs, and others combined), you must file all of them electronically. The 10-return threshold replaced the old 250-return threshold, making e-filing the default for most businesses.¹⁰¹¹

Electronic Filing Through IRIS

For tax year 2026 returns (filed in early 2027), the older FIRE system is being retired. The Information Returns Intake System (IRIS) will be the sole electronic filing platform going forward.¹² IRIS has a free web-based Taxpayer Portal for manual entry and an Application-to-Application channel for larger batches sent through third-party software. Either way, you need an IRIS Transmitter Control Code, a five-digit code that identifies your business.¹³ An old FIRE TCC doesn’t carry over; you apply for an IRIS TCC separately.

Paper Filing

If you file fewer than 10 information returns and choose paper, use the official IRS red-ink scannable forms. A version downloaded from the IRS website and printed on a regular printer is not scannable and may result in a penalty.¹⁴ Group paper 1099s by form number and send each batch with a separate Form 1096 as the transmittal cover.¹⁵

Don’t Forget State Filing

Many states require copies of your 1099s at the state level too. The simplest route in most cases is the IRS Combined Federal/State Filing program, which forwards your electronically filed 1099 data to participating state agencies.¹⁶ Not every state participates, and some that do still require a separate state-level filing for certain form types. Check your state’s revenue department for its requirements, deadlines, and whether state income tax withholding must be reported.

Fixing a 1099 After You File

The correction process depends on the type of error.

For a wrong dollar amount, code, or checkbox, file one corrected return. Prepare a new 1099 with the “CORRECTED” box checked at the top, enter the correct amounts, and submit it with a new Form 1096.

For a wrong payee name or TIN, it’s two steps. First, file a corrected return that mirrors the original but with zero in all dollar fields, which zeroes out the bad record. Second, file a brand-new return with the correct information as though it were an original. Note “Filed To Correct TIN” or “Filed To Correct Name” in the bottom margin of the new Form 1096.

Corrections submitted through IRIS follow similar logic using the portal’s built-in correction workflow.¹⁷ Either way, furnish a corrected copy to the recipient.

Penalties for Late or Incorrect Filing

The IRS uses tiered penalties that grow the longer you wait. For tax year 2026 returns:¹⁸

Up to 30 days late: $60 per return
31 days late through August 1: $130 per return
After August 1 or never filed: $340 per return
Intentional disregard: $680 per return or 10% of the amount that should have been reported, whichever is greater, with no annual cap

Annual maximums apply for small businesses with gross receipts of $5 million or less, which softens the impact for a modest number of returns. Larger businesses face higher caps. The intentional disregard penalty has no maximum at all.¹⁸

1
Internal Revenue Service. Publication 15 (2026), (Circular E), Employers Tax Guide
2
Internal Revenue Service. About Form W-9, Request for Taxpayer Identification Number and Certification
3
Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
4
Internal Revenue Service. Instructions for Form W-8BEN
5
Internal Revenue Service. Who Must File
6
Internal Revenue Service. About Form 1099-MISC, Miscellaneous Information
7
Internal Revenue Service. About Form 1099-NEC, Nonemployee Compensation
8
Internal Revenue Service. Backup withholding
9
Internal Revenue Service. 2025 Instructions for Form 945
10
Internal Revenue Service. E-file information returns
11
Internal Revenue Service. Topic no. 801, Who must file information returns electronically
12
Internal Revenue Service. Filing Information Returns Electronically (FIRE)
13
Internal Revenue Service. E-file information returns with IRIS
14
Internal Revenue Service. Form 1096 Annual Summary and Transmittal of U.S. Information Returns
15
Internal Revenue Service. About Form 1096, Annual Summary and Transmittal of U.S. Information Returns
16
Internal Revenue Service. Combined Federal/State Filing (CFSF) program state coordinator information FAQs
17
Internal Revenue Service. General Instructions for Certain Information Returns
18
Internal Revenue Service. Information return penalties