Businesses that pay independent contractors must report those payments to the IRS and the contractor on Form 1099-NEC. The reporting threshold changed with the 2025 federal tax law.
The threshold
- Payments made in 2025: report contractors paid $600 or more in the year (forms due by January 31, 2026).
- Payments made from January 1, 2026: the threshold rises to $2,000, with inflation adjustments in later years. The same change applies to most Form 1099-MISC payments.
A higher threshold means fewer forms, but you still need contractor details and records for every payment.
Deadlines
Send Form 1099-NEC to contractors and file it with the IRS by January 31. Businesses filing 10 or more information returns in total must e-file.
Before you pay a contractor
- Collect a Form W-9 with their legal name and taxpayer identification number.
- If they do not provide a valid TIN, you may have to apply backup withholding of 24%.
- Payments by card or through payment apps are usually reported by the payment processor on Form 1099-K instead.
Classification still matters
The threshold does not change whether someone is a contractor or an employee. Misclassification can bring back payroll taxes and penalties, so review long-term, full-time contractors carefully.
How we help
We collect W-9s, tag contractor payments in QuickBooks Online or Xero during the year and prepare 1099s in January. See our accounts payable services for US businesses.
