Do Commissions Get a 1099? 2026 Threshold and NEC Rules

Yes, commissions get a 1099 when they’re paid to an independent contractor and the total for the year reaches the reporting threshold. For payments made in 2026, that threshold is $2,000 per recipient, and the form used is Form 1099-NEC. Commissions paid to employees go on a W-2 instead, with taxes already withheld. Everything else about how commissions are reported flows from that one classification question.

Employee or Independent Contractor

Before the form matters, the status does. If the person earning the commission is an employee under common-law rules, their commissions are payroll: reported on Form W-2, with federal and state income tax, Social Security, and Medicare withheld from each payment. No 1099 is issued.

If the person is an independent contractor, no taxes come out of the check. The payer’s only reporting job is a Form 1099-NEC at year end, and only if the annual total hits the threshold.

The IRS decides classification by looking at three areas together:

  • Behavioral control: whether the business dictates how, when, and where the work gets done.
  • Financial control: whether the worker invests in their own equipment, can profit or lose on the work, and offers services to the open market.
  • Relationship type: whether there’s a written contract, whether the worker gets benefits like health insurance or a pension, and how permanent the arrangement is.

No single factor decides it. The IRS weighs the whole picture. When the balance tips toward contractor, 1099-NEC rules apply.

Statutory Employees

A narrow group of commission workers who might otherwise look like contractors are treated as employees for tax purposes. Four categories qualify: commission drivers distributing beverages, food products, or handling laundry and dry-cleaning pickups; full-time life insurance agents selling primarily for one company; home workers producing goods on materials the payer supplies to the payer’s specifications; and full-time traveling salespeople turning in orders from wholesalers or retailers as their principal occupation. Statutory employees receive a W-2 with the “Statutory employee” box checked in Box 13. Their commissions do not go on a 1099-NEC.1Internal Revenue Service. Statutory Employees

The 2026 Threshold: $2,000

For payments made after December 31, 2025, the reporting threshold for Form 1099-NEC rose from $600 to $2,000. A business that pays a contractor $1,800 in commissions during 2026 does not have to issue a 1099-NEC for that amount.2Internal Revenue Service. Form 1099-NEC and Independent Contractors Starting in 2027, the threshold will be adjusted annually for inflation.3Internal Revenue Service. 2026 Publication 1099

The higher threshold does not change the contractor’s tax obligation. Commission income is taxable whether or not a 1099-NEC gets generated. The form is an information return the IRS uses to cross-check; your liability doesn’t ride on whether it was issued.

When Commissions Don’t Get a 1099-NEC

Several situations knock a commission payment out of 1099-NEC territory even when the dollars are well above $2,000:

How Payers File

The paperwork starts before the first commission check. Collect a completed Form W-9 from every contractor at the outset. The W-9 provides the contractor’s legal name, address, and Taxpayer Identification Number (either an SSN or an EIN).6Internal Revenue Service. Form W-9 (Rev. March 2024)

If a contractor won’t provide a TIN, backup withholding at 24% starts immediately on nonemployee compensation. There’s no grace period for this category the way there is for interest and dividends.7Internal Revenue Service. Instructions for the Requester of Form W-9 (Rev. March 2024)

Both the copy to the recipient and the copy to the IRS are due January 31 of the year after payment. For 2026 commissions, that’s January 31, 2027, whether you file on paper or electronically.8Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC (04/2025)

Businesses filing 10 or more information returns total across all types must file electronically. The IRS runs a free portal called IRIS for this purpose.9Internal Revenue Service. E-File Information Returns with IRIS

Keep filed 1099-NEC copies, W-9s, and payment records for at least four years after the tax is due or paid, whichever is later. If gross income underreporting of more than 25% is suspected, the retention period stretches to six years.10Internal Revenue Service. How Long Should I Keep Records

Penalties for Late or Missing 1099-NECs

Penalties are charged per form and climb the longer you wait. For returns due in 2026:

  • Filed within 30 days of the deadline: $60 per form.
  • Filed after 30 days but by August 1: $130 per form.
  • Filed after August 1 or not at all: $340 per form.
  • Intentional disregard: $680 per form, with no annual cap.

The same schedule applies to incorrect payee statements. Lower tiers have annual maximums scaled to business size; the intentional disregard tier does not.11Internal Revenue Service. Information Return Penalties

What Recipients Owe on 1099-NEC Commissions

Getting a 1099-NEC means the IRS treats that income as self-employment. The amount from Box 1 goes on Schedule C attached to your Form 1040, and you can subtract ordinary and necessary business expenses there before calculating tax.12Internal Revenue Service. 1099-NEC and 1099-MISC Income Treatment Scenarios

Net profit is then hit with self-employment tax at 15.3% (12.4% Social Security plus 2.9% Medicare). The Social Security piece applies only to net earnings up to $184,500 in 2026; the Medicare piece has no cap.13Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)14Social Security Administration. Contribution and Benefit Base Half of the self-employment tax is deductible as an adjustment to gross income on Form 1040, which reduces income tax but not the SE tax itself.

Because nobody’s withholding, quarterly estimated tax payments are expected. For 2026 income, the deadlines are April 15, 2026; June 15, 2026; September 15, 2026; and January 15, 2027. Use Form 1040-ES to figure and submit each one.15Internal Revenue Service. Publication 509 (2026), Tax Calendars An underpayment penalty applies if you don’t keep up, unless your total tax due is under $1,000, or you’ve paid at least 90% of the current year’s tax or 100% of last year’s (110% if your prior-year AGI exceeded $150,000).16Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty

If You Think You Should Have Been an Employee

Received a 1099-NEC but believe you were really an employee? File Form SS-8, Determination of Worker Status. The IRS will contact the business, gather information from both sides, and issue a formal determination at no cost to you.17Internal Revenue Service. Instructions for Form SS-8 (01/2024)

Don’t hold up your return waiting for the answer, which can take months. Report the 1099-NEC income on Schedule C with your original return, then amend if the IRS rules in your favor.12Internal Revenue Service. 1099-NEC and 1099-MISC Income Treatment Scenarios

State Filings Are Separate

Federal rules don’t cover the state side. Many states require their own 1099-NEC filing, and the details vary. Some states pull data automatically through the Combined Federal/State Filing program; others want a direct filing to the state revenue department. Thresholds run from as low as $100 to as high as $2,500, and some states only require a filing when state income tax was withheld. Check with your state’s tax agency to confirm what you owe.