Do You Need to Send a 1099? The 2026 Rules for Small Business Owners

You need to send a Form 1099-NEC to any contractor you paid $2,000 or more during 2026 by check, ACH, cash, or Zelle, unless the contractor is a corporation. That threshold was $600 for years. It went up to $2,000 for payments made after December 31, 2025, so a lot of small businesses will send fewer 1099s this January than last.

The forms for 2026 payments are due February 1, 2027, because January 31 falls on a Sunday. The rest of this guide covers who counts, who does not, the exceptions that catch people, and how to get it done without a late-January scramble.

What Changed for 2026

The One Big Beautiful Bill Act, signed in July 2025, raised the reporting threshold for most 1099-NEC and 1099-MISC payments from $600 to $2,000. It applies to payments made in calendar year 2026 and later, and the IRS can adjust the $2,000 for inflation starting in 2027.

Two amounts did not change, and they are the ones most likely to trip you up:

• Gross proceeds paid to an attorney, such as a settlement you pay through a law firm, are still reported at $600.
• Royalties are still reported at $10.

Who Gets a 1099 for 2026 Payments

You paid	Form	Threshold
A contractor for services (individual, sole proprietor, single-member LLC, partnership)	1099-NEC	$2,000
An attorney or law firm for legal services, even if it is a corporation	1099-NEC	$2,000
Rent directly to a landlord who is not a corporation	1099-MISC	$2,000
Gross proceeds to an attorney, such as a settlement	1099-MISC	$600
Royalties	1099-MISC	$10

The threshold is per vendor for the whole year. A cleaner you paid $150 twice a month comes to $3,600 for the year and gets a 1099-NEC, even though no single payment came close.

Who Does Not Get One

• Anyone you paid by credit card, debit card, or a payment app. PayPal, Venmo business, Stripe, Square, and card payments are reported by the processor on Form 1099-K. Leave those amounts out of your total. If you paid a contractor $5,000, and $3,500 of it went through PayPal, only $1,500 counts, which is under the threshold.
• Corporations. C corporations, S corporations, and LLCs that elected to be taxed as either are generally exempt. The big exception is attorneys, who get a 1099 either way.
• Payments for goods only. Buying supplies or inventory is not reported. If a vendor both sold you materials and installed them, the service portion counts.
• Employees. Wages go on a W-2, not a 1099.
• Rent paid through a property manager. The manager files the 1099 to the owner, not you.

The LLC Question

"LLC" does not tell you whether a vendor gets a 1099. How the LLC is taxed does, and the vendor tells you on line 3 of their Form W-9.

• A single-member LLC is usually taxed as a sole proprietor. It gets a 1099.
• A multi-member LLC is usually taxed as a partnership. It gets a 1099.
• An LLC that elected C or S corporation treatment checks that box on the W-9. It generally does not, unless it provides legal services.

This is why the W-9 matters. Guessing from the business name is how businesses end up either missing forms or sending ones they did not need to.

Walking Through a Vendor List

Here is how five vendors at a hypothetical small business sort out for 2026. This is the same logic our free vendor tracker applies.

Vendor	Paid in 2026	Result
Painter, sole proprietor, paid by check	$6,400	1099-NEC
Web designer, single-member LLC, paid through PayPal	$3,500	None. PayPal reports it on a 1099-K.
IT support firm, S corporation	$9,000	None. Corporations are exempt.
Law firm, C corporation, legal fees	$4,200	1099-NEC. Attorneys are not exempt.
Office landlord, an individual	$30,000	1099-MISC for rent

Five vendors, three forms. Under last year's $600 rule, a contractor paid $1,200 by check would also have needed one. This year they do not.

Deadlines for 2026 Payments

• February 1, 2027: 1099-NEC to contractors and to the IRS. 1099-MISC copies to recipients. W-2s to employees and the Social Security Administration.
• February 16, 2027: 1099-MISC to recipients if you are reporting attorney gross proceeds (box 10).
• March 1, 2027: 1099-MISC to the IRS on paper.
• March 31, 2027: 1099-MISC to the IRS electronically.

There is no automatic extension for the 1099-NEC. Plan to finish by the last week of January.

Do You Have to E-File?

If you file 10 or more information returns in total for the year, you have to file them electronically. The count includes 1099s and W-2s together, so a business with 6 employees and 4 contractors is already there.

Starting with this filing season, the IRS accepts electronic 1099s only through its IRIS system. In practice, most small businesses file through QuickBooks, their payroll provider, or their accountant, which handles the e-filing for them.

Get the W-9 Before You Need It

The hardest part of 1099s is not the form. It is chasing a contractor for a W-9 in late January after they have already been paid. Two habits fix that:

1. Collect a W-9 before the first payment to any new contractor, landlord, or attorney. Make it part of onboarding a vendor, not part of year-end.
2. Check your vendor list in November for anyone you paid by check or ACH who does not have a W-9 on file, and ask while they are still waiting on your next payment.

If a vendor will not give you a correct taxpayer ID, the IRS expects you to withhold 24% of future payments as backup withholding. That usually gets a W-9 back quickly.

What Happens If You Miss It

For forms due in 2027, the penalty is $60 per form if you file within 30 days of the deadline, $130 per form if you file by August 1, and $340 per form after that. The same schedule applies separately to the copy you owe the recipient. Intentionally ignoring the requirement costs more. None of these are large for one form, but they add up quickly across a vendor list, and they are completely avoidable.

Doing It in QuickBooks Online

If you already use QuickBooks Online, most of the work is setup:

• Mark each contractor as a 1099 vendor and store their W-9 details.
• Map the expense accounts you use for contractors, rent, and legal fees to the right 1099 box.
• Run the 1099 transaction detail report in December and check it against your own list.

QuickBooks automatically leaves out payments made by credit card, but only if they were recorded as card payments. Payments recorded as checks or bank transfers are counted, so it is worth scanning the report for PayPal or card payments entered the wrong way.

A Free Tracker to Do the Sorting

We put the rules above into a free 1099 vendor tracker and year-end close checklist. You list each vendor, pick their entity type and what you paid them for, and enter the total and any card payments. The spreadsheet tells you 1099-NEC, 1099-MISC, or no form, flags anyone missing a W-9, and counts your returns for the e-file rule. The checklist walks the rest of the year-end close from November to your CPA handoff.

If you keep your own books, the monthly bookkeeping checklist is what makes year-end easy. Most of the 1099 work is just a report when the books have been reconciled every month.

Frequently Asked Questions

Is the 1099 threshold $600 or $2,000?

For payments made in 2026 and later, it is $2,000 for contractors, rent, and most other 1099-NEC and 1099-MISC payments. The $600 threshold still applies to gross proceeds paid to attorneys, and to 1099s for payments made in 2025 and earlier.

Do I send a 1099 to someone I paid through Zelle?

Yes, if they cross the threshold. Zelle moves money directly between bank accounts and does not issue a 1099-K, so those payments count toward the $2,000 the same way a check does.

Do I need a 1099 for a contractor who is out of the country?

No 1099 is needed for a foreign contractor who did the work outside the United States. You should have a Form W-8BEN on file instead of a W-9. Talk to your CPA if the work was done in the U.S.

What if a contractor refuses to give me a W-9?

Document your requests, and begin backup withholding at 24% on future payments. File the 1099 with the information you have. Your CPA can help with the details.

Can I file 1099s myself?

Yes. QuickBooks, most payroll providers, and the IRS IRIS portal all let you file. The part that takes judgment is deciding who needs one, which is what the tracker is for.

This is general guidance for common small business situations, not tax advice. If you would rather hand off the year-end close and 1099 prep, our bookkeeping service does it inside your own QuickBooks Online file, and we work alongside your CPA.