1099 Rules Are Changing for 2026

If you own a small business and pay independent contractors, subcontractors, attorneys, landlords or other vendors, there are some important 1099 changes for 2026 that you need to know about.

And one of them is a big one.

For years, business owners have been used to hearing this rule: If you pay someone $600 or more, you may need to issue a 1099.  For certain information returns, that threshold is changing.

Beginning with payments made in 2026, the IRS has increased the minimum reporting threshold for certain payments from $600 to $2,000. Beginning after 2026, the threshold will also be adjusted for inflation.

That is probably the biggest 1099 change small business owners need to know for 2026, but it is certainly not the only one.

Let’s talk about what is changing, what isn’t, and what you should be doing before January rolls around.

What Is the New 1099-NEC Threshold for 2026?

For payments made in 2026, the reporting threshold for Form 1099-NEC, Nonemployee Compensation, increases from $600 to $2,000.

Form 1099-NEC is commonly used to report payments for services performed for your trade or business by someone who is not your employee.

That can include payments to:

• Independent contractors
• Subcontractors
• Accountants
• Attorneys
• Architects
• Engineers
• Other professionals and service providers

Generally, if the payment meets the requirements for nonemployee compensation and you pay the person $2,000 or more during 2026, Form 1099-NEC may be required.  The $2,000 threshold also applies to several categories commonly reported on Form 1099-MISC, including rents, prizes and awards, certain other income payments, and medical and health care payments. Not every 1099 reporting threshold changed to $2,000, however, so you should not assume that $2,000 is now the threshold for every type of information return.

For example, the threshold for payment of royalties reported on a 1099-MISC is $10.  The same threshold applies to broker payments in lieu of dividends.  Gross proceeds paid to an attorney and cash payments for fish purchased for resale are reported on a 1099-MISC and has a threshold of $600.  You are required to report fishing boat proceeds for all amounts.  Aggregate direct sales of consumer products for resale are subject to a threshold of $5,000.

Just a note about attorney fees: payments made for legal services are reported on Form 1099-NEC and are subject to the threshold of $2,000.  Gross proceeds paid to an attorney including settlement proceeds paid to an attorney are subject to the $600 threshold and are reported on a 1099-MISC in Box 10.

Should I Still Get a W-9 From Contractors and Vendors?

Yes. A higher reporting threshold does not mean you should stop collecting Form W-9, Request for Taxpayer Identification Number and Certification.

In my opinion, this is where businesses can save themselves a lot of aggravation later.

The W-9 gives you information you need for information reporting, including the vendor’s proper taxpayer name, federal tax classification and taxpayer identification number.

Don’t wait until January to discover that:

• You don’t have a W-9.
• You don’t have the vendor’s TIN.
• You don’t know whether the vendor is taxed as an individual, partnership or corporation.
• The name in QuickBooks doesn’t match the taxpayer name on the W-9.

A good procedure is simple: Request the W-9 before you pay the vendor.

Then keep it on file.

When Is Form 1099-NEC Due?

Form 1099-NEC is generally due January 31 to both the IRS and the recipient.

If a filing deadline falls on a Saturday, Sunday or applicable legal holiday, the due date generally moves to the next business day.

If you wait until January to review your vendors, find missing W-9s, determine who should receive a 1099 and clean up incorrectly coded transactions, you have given yourself a very short window to fix any problems you find.

Good 1099 preparation starts before year-end.

Do I Have to E-File My 1099s?

Possibly. The IRS requires electronic filing if you are required to file 10 or more information returns.

One important detail is that the 10-return threshold is determined by aggregating information returns, rather than looking at each form type separately.

So don’t assume that you can file nine of one form and nine of another on paper simply because neither form individually reached 10.

What Is IRIS and Do I Have to File My 1099s Through It Myself?

You may be hearing more about IRIS—the Information Returns Intake System.

Beginning with tax year 2026 and the 2027 filing season, IRIS becomes the IRS intake system for information returns as the old FIRE system is retired. Once FIRE shuts down, it will no longer accept current-year, prior-year or corrected submissions.

But that does not mean every small business owner has to learn how to prepare and submit 1099s directly through the IRS portal.

You have options.

The IRS provides the IRIS Taxpayer Portal for businesses that want to prepare and electronically file information returns directly with the IRS.

Businesses can also use third-party 1099 preparation and e-filing services, such as Tax1099.com and other information-return filing platforms. Your accounting, payroll or tax software may also offer 1099 preparation and e-filing.

The important thing to understand is:

IRIS is the IRS system receiving the information. It doesn’t necessarily have to be the software you personally use to prepare and submit your 1099s.

If you plan to file directly through IRIS, don’t wait until January to get started. The IRS publication notes that a typical IRIS Transmitter Control Code (TCC) application can take up to 45 business days to process.

What Is the Form 1099-K Reporting Threshold for 2026?

This is where things can get confusing.

You may have heard that the Form 1099-K threshold for 2026 is more than $20,000 and more than 200 transactions.

That’s true for third-party settlement organizations (TPSOs), such as qualifying payment apps and online marketplaces.  Examples include PayPal, Venmo, CashApp, eBay, Etsy, Amazon Marketplace, Airbnb, Uber and other qualifying payment apps and online marketplaces that facilitate transactions between buyers and sellers.

For third-party network transactions, a TPSO is generally required to issue Form 1099-K when both of these conditions are met:

• Payments exceed $20,000, and
• There are more than 200 transactions.

But it is not the threshold for payment card transactions.

Credit and Debit Card Payments Are Different

There is no minimum federal reporting threshold for payment card transactions.

Payment cards include credit cards, debit cards and certain stored-value cards.

If a business accepts a credit or debit card payment for goods or services, the payment card processor has Form 1099-K reporting responsibility regardless of the dollar amount or number of transactions.

For example, suppose you pay a contractor $700 using your business credit card.  That payment is a payment card transaction.  The $20,000/200-transaction threshold does not apply to that $700 credit card payment.

And this matters to your 1099 reporting.

Why Does the Way I Pay a Contractor Matter?

This matter because you don’t want to report the same payment twice.

Payments made using a credit card or other payment card that are reportable under the Form 1099-K rules are reported by the payment settlement entity.

Your business should not also include those same payments on Form 1099-NEC or Form 1099-MISC.

Let’s look at an example.

Suppose your business paid a subcontractor $12,000 during 2026:

• $7,000 by check
• $3,000 by direct ACH from your bank account
• $2,000 by business credit card

When determining your Form 1099-NEC reporting, you would generally look at the $10,000 paid directly by check and ACH.

You would not add the $2,000 paid by credit card to the Form 1099-NEC. That payment falls under the Form 1099-K reporting rules.

Otherwise, you could cause the same income to be reported twice.

An ACH Payment Is Not the Same as a Payment Card Transaction

This is an important distinction.  Just because a payment is made electronically does not mean it falls under the Form 1099-K rules.

An ordinary ACH or direct bank transfer is not automatically a payment card transaction. In fact, the IRS specifically states that automated clearing houses do not qualify as third-party settlement organizations under these rules.

So when preparing your 1099s, don’t simply divide payments into “checks” and “electronic payments.”

You need to know how the electronic payment was processed.

What About PayPal, Venmo and Other Payment Apps?

Be careful here too.

Don’t automatically assume every payment made through an app belongs on a 1099-K.

Third-party payment networks have their own Form 1099-K rules, and the way a transaction was processed matters.

For 2026, qualifying third-party settlement organizations generally have the more-than-$20,000 and more-than-200-transactions reporting threshold discussed above.

This is another reason good bookkeeping needs to tell you more than simply how much you paid a vendor.

Your Bookkeeping Should Tell You How a Vendor Was Paid

This is one of those areas where accurate bookkeeping makes year-end reporting much easier.

Your accounting records shouldn’t simply tell you: “We paid ABC Contracting $12,000.”  You also need to know how that $12,000 was paid.

When reviewing vendors for 1099 reporting, you may need to distinguish among:

• Checks
• Cash
• ACH/direct bank transfers
• Credit card payments
• Debit card payments
• Third-party payment networks

This is why I don’t recommend simply running a vendor expense report in QuickBooks, looking at the total paid to each contractor and putting that amount on a 1099.

You need to know what makes up that number.

Good 1099 preparation isn’t just about knowing who you paid and how much you paid them.

You also need to know how you paid them.

What Happens If Backup Withholding Applies?

There is an important exception to the normal reporting thresholds.

If you backup withhold on a payment, you must generally file the appropriate Form 1099 and report the payment and amount withheld even if the payment is below the normal reporting threshold.

This is another reason getting a properly completed W-9 matters.

The IRS also offers TIN Matching, which allows eligible payers and authorized agents to compare taxpayer names and identification numbers with IRS records before filing certain information returns.

The IRS notes that validating names and TINs before filing can help reduce backup-withholding notices and penalty notices.

Do Partnerships Still Receive 1099s?

Generally, yes. The IRS states that reporting is generally required for payments to partnerships when those payments exceed the applicable reporting threshold.

Don’t assume that because the vendor has “LLC” in its name, you don’t have to issue a 1099.  An LLC is a legal entity type. It doesn’t, by itself, tell you how that business is taxed.

That is one of the reasons you need the W-9.

What About Single-Member LLCs?

Single-member LLCs can cause confusion during 1099 preparation.

If a single-member LLC is disregarded for federal income tax purposes, the owner’s taxpayer information is generally used for information reporting rather than treating the LLC as a separate taxpayer.

If an LLC has elected to be taxed as a corporation or is otherwise classified differently for federal tax purposes, the reporting treatment can be different.

Again: Don’t guess. Follow the W-9.

Are There Other Changes to Forms 1099-MISC and 1099-NEC for 2026?

Yes. Forms 1099-MISC and 1099-NEC have been updated to allow reporting of:

• Cash tips
• Treasury Tipped Occupation Codes
• Overtime compensation

Form 1099-K has also been updated to allow reporting of cash tips and the applicable Treasury Tipped Occupation Code.

These changes are another reminder that businesses need systems capable of tracking the information that may be required at year-end.

Your Year-End 1099 Preparation Checklist

1099 preparation should not begin in January.

I recommend starting your review during the last few months of the year so you have time to find and fix problems. 

In my opinion, it is best to request a form W-9 before you pay any vendor.  Tell your vendor that your business requires a signed Form W-9 before you can issue payment.  It is much easier to get this when a vendor is awaiting payment than to ask for it later after they have received payment.

October: Review Your Vendors

• Review everyone your business has paid during the year.
• Identify vendors who may be subject to 1099 reporting.
• Make sure you have a completed Form W-9 on file.
• Request any missing W-9s.
• Review vendor classifications.
• Pay particular attention to sole proprietors, single-member LLCs, partnerships and corporations.
• Check whether names and TINs in your accounting system agree with the W-9s you received.

November: Review Your Bookkeeping

• Review accounts where potentially reportable payments may have been recorded.
• Look at contractor and subcontractor expenses.
• Review rent, legal fees and other potentially reportable payments.
• Look for vendor payments that may have been posted to supplies, repairs or another expense account by mistake.
• Review how payments were made.
• Separate direct payments such as checks and ACH transfers from credit/debit card payments and third-party network payments.
• Clean up vendor records while you still have time.

December: Get Ready to File

• Review year-to-date totals for potentially reportable vendors.
• Follow up again on any missing W-9s.
• Determine whether you will be required to e-file.
• Decide how you will prepare and file your 1099s.
• If filing directly through IRIS, make sure your registration and TCC are taken care of.
• Make sure you know who will be responsible for preparing and filing the forms.
• Review your payment methods one more time so you don’t include payments on a 1099-NEC that are reportable by a payment settlement entity on Form 1099-K.

January: Finalize—Don’t Start

Once all of the prior year’s transactions have been recorded:

• Perform one final vendor review.
• Review final vendor totals.
• Confirm payment methods.
• Make sure late-December transactions have been included.
• Verify W-9 information.
• Prepare the required information returns.
• Provide recipient copies by the applicable deadline.
• File the returns with the IRS.

The goal is simple:

January should be the month you prepare the forms—not the month you start figuring out what happened during the previous year.

Why Accurate Bookkeeping Matters for 1099 Reporting

This is the part of 1099 preparation that I think gets overlooked.

Preparing 1099s isn’t just about filling out tax forms in January. Your bookkeeping needs to support the reporting. By year-end, you should be able to answer the following questions.

Who did we pay?
How much did we pay them?
What did we pay them for?
How did we pay them?
How is the vendor taxed?
Do we have a W-9?
Does the name and TIN information match the W-9?
Are these payments our responsibility to report, or are they reportable under the Form 1099-K rules by a payment settlement entity?
Does this vendor need a 1099?

Those questions are much easier to answer when the books have been maintained properly all year.

They are much harder to answer when someone starts digging through a year’s worth of transactions in January.

The Bottom Line

There are several important 1099 changes for 2026, but the headline for many small businesses is the increase in the reporting threshold from $600 to $2,000 for certain information returns, including many payments reported as nonemployee compensation on Form 1099-NEC.

But the higher threshold doesn’t eliminate the need for good recordkeeping.  You still need W-9s.  You still need accurate vendor records.  You still need to know who you paid and what you paid them for.  And, importantly, you need to know how you paid them.

A $10,000 contractor expense in QuickBooks doesn’t necessarily mean $10,000 belongs on Form 1099-NEC if some of those payments were made by credit or debit card and fall under the Form 1099-K reporting rules.

Good 1099 preparation starts with good bookkeeping.

And it starts before January.

If you need help reviewing your QuickBooks file, cleaning up vendor information or getting your books ready for year-end 1099 reporting, Melton Bookkeeping & Accounting Services can help.

Frequently Asked Questions About 2026 1099 Reporting

1. What is the Form 1099-NEC threshold for 2026?

For 2026, the reporting threshold for Form 1099-NEC increases from $600 to $2,000 for nonemployee compensation. Beginning after 2026, the $2,000 threshold will also be adjusted for inflation.

2. Do I still need to get a W-9 if I don’t expect to pay a contractor $2,000?

Yes. I recommend getting a completed Form W-9 before you pay a new contractor or vendor who may be subject to information reporting. You may ultimately pay the vendor more than expected, and having the W-9 on file gives you the taxpayer name, identification number and federal tax classification you may need for year-end reporting.

Don’t wait until January to start chasing down W-9s.

3. Do I include payments made by credit card or debit card on Form 1099-NEC?

Generally, no. Payments made by credit card, debit card or another qualifying payment card are reported under the Form 1099-K rules by the payment settlement entity.

Those payments should not also be reported by your business on Form 1099-NEC.

This is why knowing how you paid a contractor is an important part of 1099 preparation.

4. Is an ACH or bank transfer treated the same as a credit card payment for 1099 purposes?

No. An electronic payment is not automatically a payment card transaction.

A direct ACH or bank transfer generally remains part of your business’s Form 1099 reporting analysis. Don’t exclude a payment from Form 1099-NEC simply because it was paid electronically.

You need to know how the payment was processed, not just whether it was electronic.

5. What is the Form 1099-K threshold for 2026?

It depends on the type of transaction. For qualifying third-party network transactions, the 2026 federal reporting threshold generally requires both more than $20,000 in payments and more than 200 transactions.

However, payment card transactions are different. There is no minimum federal reporting threshold for credit and debit card transactions under the Form 1099-K payment card rules.

That distinction is important when reviewing contractor payments at year-end.

6. If I pay a contractor partly by check and partly by credit card, what goes on the 1099-NEC?

You generally include the payments that are your responsibility to report and exclude payments that are reportable by a payment settlement entity on Form 1099-K.

For example, if you paid a contractor $10,000 by check and $2,000 by business credit card, you would generally consider the $10,000 of direct payments for Form 1099-NEC reporting. You would not add the $2,000 credit card payment to the 1099-NEC because the payment settlement entity handles the information reporting for that transaction.

This is one reason simply looking at the total amount paid to a vendor in QuickBooks may not give you the correct 1099 amount.

7. When should I start preparing for 1099 filing?

Before January. I recommend beginning your review in October or November. Review your vendors, collect missing W-9s, check vendor classifications, review payment methods and make sure potentially reportable payments are properly recorded.

Then, after all December transactions have been entered, perform your final review and prepare the forms.

January should be the month you prepare your 1099s—not the month you start figuring out what happened during the previous year.

This article is based primarily on IRS Publication 1099 (2026), General Instructions for Certain Information Returns, together with current IRS instructions and guidance for Forms 1099-NEC, 1099-MISC and 1099-K. Tax laws and IRS guidance can change. This article is for general educational purposes and is not intended as individualized tax advice.