1099-NEC: payments for work
For payments made in tax years beginning after 2025, the federal reporting threshold for many Form 1099-NEC payments increased to $2,000 and is indexed beginning in 2027. Subject to the current instructions and exceptions, this generally covers payments made in the course of business to nonemployees for services, including parts and materials. Backup withholding can trigger reporting regardless of the payment amount.
- Deadline: January 31, to both the contractor and the IRS, the earliest filing deadline in the calendar, with no automatic extension. This is the one that catches people
- Payment method matters: amounts paid by credit card or third-party platforms (card processors, PayPal business) are excluded, the processor reports those on 1099-K. Cash, check, ACH, Zelle: yours to report
1099-MISC: the leftovers that still matter
MISC survives for non-service payments, the ones a service business actually touches:
- Rent of $2,000 or more for 2026 payments, subject to the current instructions and entity exceptions (Form 1099-MISC, box 1)
- Prizes and awards of $2,000 or more for 2026 payments, subject to the current Form 1099-MISC instructions
- Medical and health care payments (box 6), with its own corporation-exemption override: medical corporations still get reported
- Royalties over $10, fishing boat proceeds, crop insurance, listed for completeness; you'll likely never file them
- Deadline: January 31 to recipients, but IRS copies run later (end of February paper / March e-file), one of the few genuine differences
The two famous quirks
- Attorneys, quirk one: fees for legal services → 1099-NEC, and the corporation exemption does NOT apply, incorporated law firms still get one
- Attorneys, quirk two: gross proceeds paid to an attorney (settlements routed through their trust account) → 1099-MISC box 10, not NEC. Same lawyer, different money, different form
The corporation exemption, correctly stated
Payments to C and S corporations are generally exempt from both forms, but 'Inc.' or 'LLC' in the name proves nothing. An LLC is reportable unless it's elected corporate taxation, and the only way to know is the W-9's entity checkbox. This is the practical argument for the W-9-before-first-check system ( Collecting W-9s: The System That Saves Your January ): the form sorts your January for you.
Getting it filed without drama
- Run payments by vendor for the year; for 2026 payments, review payees at the applicable $2,000 federal threshold while separately reviewing card and third-party-network payments and special exceptions
- Sort by W-9 entity type: corporations out (attorney exception noted), everyone else gets their form. NEC for services, MISC for rent
- E-file: mandatory at 10+ total information returns, and simply easier below that; QuickBooks' 1099 module handles the mapping if vendor accounts were tagged all year
- Penalties for late/wrong/missing forms run per form and tier up with delay, the January 31 NEC date is the one to calendar in December
Frequently asked questions
I paid a sub $580. File anyway?
Not required under the threshold. Voluntary filing is permitted and harmless, but check the number includes all payments (cash + check + ACH) before deciding you're under.
I missed the deadline. How bad, and what now?
File immediately, penalties tier by lateness (roughly $60 per form if within 30 days, rising to $130 by August, $330+ beyond, inflation-adjusted), so speed literally buys the lower tier. Chronic non-filing is what invites the audit interest; a late-but-filed year is a footnote.
Can someone just own this whole cycle for me?
Yes. W-9 collection, year-round payment tracking, and January filings are standard scope in our payroll-and-books engagements. Your subs get their forms; you get your January back. Payroll Administration for Small Businesses
Primary sources