What 1099 Form Do I Use for Subcontractors: NEC vs. MISC

For payments to a subcontractor, the form you file is Form 1099-NEC (Nonemployee Compensation). Form 1099-MISC still exists, but it is no longer the right form for compensation paid to subcontractors, freelancers, or other nonemployees who performed services for your business.¹

What Each Form Is For

Before 2020, subcontractor pay was reported on Form 1099-MISC. The IRS brought Form 1099-NEC back starting with the 2020 tax year, and it is now the only correct form for reporting payments to subcontractors and other nonemployees.¹ The total you paid the subcontractor goes in Box 1.

Form 1099-MISC now covers a narrower list of payments that are not compensation for services: rent (Box 1), prizes and awards (Box 3), medical and health care payments (Box 6), crop insurance proceeds, royalties, and gross proceeds paid to an attorney (Box 10).² If you hired someone to do work for your business, that payment belongs on a 1099-NEC.

One detail that catches people out: expense reimbursements. If you reimburse a subcontractor for travel or materials and the subcontractor did not account for those expenses back to you, the reimbursement counts as part of their nonemployee compensation and goes in the Box 1 total on Form 1099-NEC.³

When You Have to File a 1099-NEC

For years the trigger was $600. That changed under legislation enacted in 2025. For payments made in tax year 2026 and later, you only have to file a 1099-NEC if total payments to a single recipient reach $2,000 or more during the calendar year.⁴ The IRS will adjust this threshold for inflation beginning in 2027.⁵

Payments below $2,000 no longer trigger a 1099, but the income is still taxable to the recipient, and your own deduction for that expense depends on documentation. Keep the records either way.

The reporting obligation also depends on the recipient’s legal structure. You generally must issue a 1099-NEC when you pay $2,000 or more to:

Individuals and sole proprietors, including freelancers and independent contractors who are not your W-2 employees
Partnerships, including LLCs taxed as partnerships
Single-member LLCs, which are treated as sole proprietorships unless they elected corporate treatment
Estates, for services performed on behalf of the estate

The main exemption is corporations. If the subcontractor is a C-Corp, an S-Corp, or an LLC that elected corporate tax treatment, you generally do not need to file a 1099-NEC.⁶ Two exceptions still apply regardless of corporate status: payments to attorneys, and payments for medical or health care services.

Payments You Do Not Put on a 1099-NEC

If you paid a subcontractor by credit card, debit card, or through a third-party settlement organization such as PayPal, Venmo, or Stripe, do not report that payment on a 1099-NEC. Those transactions are the payment processor’s responsibility, and the processor reports them on Form 1099-K.⁷ Under the One, Big, Beautiful Bill Act, the 1099-K threshold has reverted to $20,000 in gross payments and more than 200 transactions per payee per year.⁸ Credit card transactions have no minimum reporting threshold at the processor level.

Split payments are a common trap. If you paid a subcontractor $4,000 by direct bank transfer and $1,500 through a payment app, you issue a 1099-NEC only for the $4,000 direct payment. The $1,500 is the processor’s reporting responsibility. Do not double-report the same payment on both a 1099-NEC and a 1099-K.⁷

Form 1099-NEC is also only for U.S. persons. If you hired a nonresident alien subcontractor, their pay is reported on Form 1042-S instead, and you must file Form 1042 as an annual withholding return.⁹ To determine which side of that line a subcontractor sits on, collect a Form W-8BEN (individuals) or W-8BEN-E (entities) rather than a W-9. A U.S. citizen or resident alien should always give you a W-9, even if they live abroad.¹⁰

Get the W-9 Before You Pay

Every domestic subcontractor should give you a completed Form W-9 before the first payment.¹¹ The W-9 has everything you need to fill out a 1099-NEC: legal name, address, TIN (either SSN or EIN), and entity type. That entity classification is what tells you whether a 1099 is required at all.

If a subcontractor refuses to provide a W-9, or gives you a TIN that does not match IRS records, you are required to withhold 24% of every payment and send it to the IRS. This is backup withholding.¹² Any amount you withhold gets reported in Box 4 of the 1099-NEC. If you fail to withhold when required, the IRS can assess penalties directly against your business.

Request a new W-9 whenever a subcontractor’s name, address, or tax classification changes. Stale W-9s are one of the most common causes of TIN mismatch notices.

Deadlines

Form 1099-NEC is due to both the IRS and the subcontractor by January 31 of the year after payment. For payments made in 2026, the deadline is January 31, 2027. That January 31 date applies whether you file on paper or electronically; there is no later electronic filing date for the 1099-NEC.³

Form 1099-MISC has a later IRS filing deadline of February 28 on paper or March 31 electronically, but the recipient copy is still due January 31.³

If your business files 10 or more information returns of any type combined, you must file all of them electronically, through the IRS’s free IRIS Taxpayer Portal or through the FIRE system.¹³ Paper filers under that threshold must include Form 1096 as a cover sheet and use the official scannable IRS forms; a form printed from a PDF download will not be accepted.¹⁴

Penalties for the Wrong Form or a Late One

The IRS charges separate penalties for filing the return late with the IRS and for furnishing the payee statement late to the subcontractor. You can be hit with both on the same form. For returns due in 2026, the per-form penalty scales with how late you are:¹⁵

Up to 30 days late: $60 per form
31 days late through August 1: $130 per form
After August 1 or never filed: $340 per form
Intentional disregard: $680 per form, with no annual cap

Annual caps limit total exposure for non-intentional failures, and small businesses with average annual gross receipts of $5 million or less qualify for reduced maximum caps. The per-form amounts stay the same either way; only the ceiling drops. Filing a 1099-MISC when a 1099-NEC was required is treated as an incorrect return and can draw the same penalties as a late one, so match the form to the payment from the start.

1
Internal Revenue Service. About Form 1099-NEC, Nonemployee Compensation
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Internal Revenue Service. About Form 1099-MISC, Miscellaneous Information
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Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
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Internal Revenue Service. 2026 Publication 1099 (Draft)
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IRS Fact Sheet FS-2025-08. Form 1099-K Frequently Asked Questions
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Internal Revenue Service. Am I Required to File a Form 1099 or Other Information Return?
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Internal Revenue Service. Form 1099-K FAQs: Third Party Filers of Form 1099-K
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Internal Revenue Service. IRS Issues FAQs on Form 1099-K Threshold Under the One, Big, Beautiful Bill
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Internal Revenue Service. Reporting Payments to Independent Contractors
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Internal Revenue Service. Form W-8BEN, Certificate of Foreign Status of Beneficial Owner
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Internal Revenue Service. About Form W-9, Request for Taxpayer Identification Number and Certification
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Internal Revenue Service. Fast Facts to Help Taxpayers Understand Backup Withholding
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Internal Revenue Service. General Instructions for Certain Information Returns
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Internal Revenue Service. About Form 1096, Annual Summary and Transmittal of U.S. Information Returns
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Internal Revenue Service. Information Return Penalties