Did You Make Any Payments That Require a 1099?

If your business paid a non-employee $2,000 or more during 2026 for services, rent, prizes, or healthcare, that payment most likely requires a 1099. The reporting obligation sits with the payer, applies only to payments made in a trade or business, and covers payments to individuals, sole proprietors, partnerships, and most LLCs. Corporations are generally exempt, with two important exceptions. The $2,000 figure is new for 2026: the longstanding $600 threshold was raised by the One Big Beautiful Bill Act for payments made after December 31, 2025.¹

Payments That Trigger a 1099 in 2026

The dollar threshold is not the same for every payment type. Most categories moved to $2,000, but several kept their older, lower triggers. Sorting your payments by category first, then by dollar amount, is the reliable way to figure out what you owe.

Payments Reportable at $2,000 or More

These are the categories the One Big Beautiful Bill Act raised from $600 to $2,000. Starting in 2027, the IRS will adjust this amount for inflation and round to the nearest $100.¹

Fees paid to independent contractors, freelancers, consultants, subcontractors, and outside directors for services. These go on Form 1099-NEC.
Rent for office space, warehouse leases, equipment, or land. Reported on Form 1099-MISC. Rent paid directly to a real estate agent acting as property manager may be exempt because the agent handles their own reporting.
Prizes and awards not tied to services. Form 1099-MISC.
Medical and healthcare payments to physicians, hospitals, or other providers made in the course of your business. Form 1099-MISC. These are reportable even when the provider is incorporated.²
Crop insurance proceeds.

Payments Still Reportable at $600 or More

Attorney fees did not move. They fall under a different section of the tax code (Section 6041A) that the 2025 law did not amend, so any business trying to apply a single threshold across the board will get these wrong.³

Payments to attorneys for legal services. Reported on Form 1099-NEC at $600 or more, regardless of whether the law firm is a corporation.
Gross proceeds paid to an attorney in connection with a legal settlement. Reported on Form 1099-MISC, Box 10, at $600 or more.⁴
Real estate sale or exchange proceeds, generally reportable at $600 or more on Form 1099-S.

Payments Reportable at $10 or More

Interest paid to a vendor or client is reported separately on Form 1099-INT.

Who Has to Receive the 1099

Even when a payment falls into a reportable category and clears the dollar threshold, the recipient’s tax classification decides whether you actually file. You generally issue a 1099 to individuals, sole proprietors, partnerships, and LLCs taxed as partnerships or single-member entities. Their income is not otherwise reported through a payroll system, which is why the IRS wants your report.

Payments to C-corporations and S-corporations are generally excluded from 1099 reporting. If a vendor’s W-9 shows a corporate tax classification, you can usually skip the filing.⁷

Two categories override the corporate exemption:

Payments to attorneys and law firms are reportable regardless of corporate status.⁴
Medical and healthcare payments to incorporated providers are still reportable.²

Payments That Do Not Require a 1099 From You

Some payments look reportable but are handled elsewhere or fall outside the trade-or-business rule entirely.

Personal payments. The 1099 rule applies only to payments made in the course of a trade or business. Paying a neighbor to mow your lawn, or a babysitter, does not create a filing obligation.

Payments through credit cards or third-party platforms. When you pay a vendor through a credit card processor, PayPal, Venmo, or a similar third-party settlement organization, the platform reports those payments on Form 1099-K. You should not issue your own 1099-NEC or 1099-MISC for the same transactions, since that produces duplicate reporting. The 1099-K reporting threshold is $20,000 in gross payments and more than 200 transactions per payee, and both conditions must be met before the platform is required to file. The One Big Beautiful Bill permanently reinstated this threshold after several years of IRS delays in implementing a lower amount.⁸ Before preparing your year-end 1099s, sort out which vendors were paid through these channels so you do not double-report them.

Payments to foreign contractors. Standard 1099 forms are for U.S. persons only. If you pay a foreign individual or entity for services, you collect Form W-8BEN (individuals) or W-8BEN-E (entities) instead of a W-9, and reporting goes on Form 1042-S rather than a 1099.⁹ The default withholding rate on U.S.-source income paid to foreign recipients is 30%, which a tax treaty may reduce or eliminate. Without a W-8BEN on file before you pay, you are stuck withholding the full 30% and cannot claim a treaty-reduced rate.¹⁰

When Expense Reimbursements Get Added to a 1099

Reimbursing a contractor for travel, materials, or supplies can quietly increase what you owe to report. Whether those reimbursements go on the 1099 depends on how your arrangement is structured.

Under an accountable plan, reimbursements stay off the 1099. Three conditions have to be met: the expenses must have a genuine business connection, the contractor must provide adequate documentation such as receipts or invoices within 60 days, and any excess reimbursement must be returned within 120 days.

If any of those conditions is missed, the IRS treats the arrangement as a nonaccountable plan and every reimbursement dollar becomes additional compensation. That amount gets added to what you report on Form 1099-NEC. Businesses that reimburse casually, without collecting receipts or tracking business purpose, may push a vendor over the $2,000 threshold without realizing it.

Which Form to Use

Putting a payment on the wrong form is treated as an incorrect filing and can trigger penalties even when the dollar amount is right.

Form 1099-NEC is for nonemployee compensation: contractor and freelancer service fees, consultant payments, outside director fees, and attorney fees for legal services.⁷

Form 1099-MISC covers most of what does not fit on the NEC: rent, prizes, awards, medical and healthcare payments, crop insurance, royalties, and gross proceeds paid to attorneys in connection with settlements (Box 10).⁴

Specialized forms cover narrower situations. Form 1099-INT reports interest paid to a vendor or client. Form 1099-DIV reports dividends and distributions of $10 or more.⁶ Form 1099-S reports proceeds from real estate sales or exchanges.¹¹

When the Filings Are Due

Each 1099 has to reach two places: the recipient and the IRS. The deadlines depend on the form.

For Form 1099-NEC, both the recipient copy and the IRS copy are due January 31. Paper and electronic filers face the same date.³

For Form 1099-MISC, the recipient copy is due January 31. The IRS copy is due February 28 on paper or March 31 if filed electronically.²

If your business files 10 or more information returns of any type during the year (combining 1099s, W-2s, and other information returns), you must file them electronically.¹² The IRS operates a free electronic filing portal called IRIS. Paper filers stay under the threshold but have to include Form 1096 as a transmittal.¹³

What Happens if You Miss a Filing

Penalties are charged per return, and they apply to both late IRS filings and late delivery to recipients. For the 2026 tax year:

Filed within 30 days of the deadline: $60 per return
Filed after 30 days but by August 1: $130 per return
Filed after August 1 or not at all: $340 per return
Intentional disregard: $680 per return with no maximum cap¹⁴

Small businesses, defined as those with average annual gross receipts of $5 million or less, face lower maximum penalty caps at each tier, but the per-return amounts are the same. Ten late returns at $60 is $600; ten at $340 is $3,400. Intentional disregard is uncapped for every filer.

Errors caught after filing are fixed with a corrected 1099, with the “Corrected” box checked, sent to both the IRS and the recipient. Because the penalty structure rewards speed, correcting quickly costs less than waiting.

1
Office of the Law Revision Counsel. 26 USC 6041 – Information at Source
2
Internal Revenue Service. Publication 1099 – General Instructions for Certain Information Returns
3
Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
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Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
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Internal Revenue Service. About Form 1099-MISC, Miscellaneous Information
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Internal Revenue Service. Instructions for Form 1099-DIV
7
Internal Revenue Service. Reporting Payments to Independent Contractors
8
Internal Revenue Service. Form 1099-K FAQs – General Information
9
Internal Revenue Service. Instructions for Form 1042-S
10
Internal Revenue Service. Instructions for Form W-8BEN
11
Internal Revenue Service. Instructions for Form 1099-S
12
Internal Revenue Service. E-file Information Returns
13
Internal Revenue Service. About Form 1096, Annual Summary and Transmittal of U.S. Information Returns
14
Internal Revenue Service. Information Return Penalties