Paying Contractors: Form W-9, Form 1099-NEC and the New $2,000 Threshold

By Web Asset House Studio · October 28, 2026 · Updated October 29, 2026

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How we wrote this: A summary of IRS pages on independent contractors, Form W-9 and the December 2026 Instructions for Forms 1099-MISC and 1099-NEC (linked below), checked October 28, 2026. It is general information, not tax advice. Ask a tax professional about your situation.

If your business pays freelancers, consultants or other independent contractors, the IRS paperwork comes down to two forms: a W-9 you collect before you pay, and a 1099-NEC you file after the year ends. The big change for 2026: the reporting threshold rose from $600 to $2,000.

Step 1: Confirm they're a contractor

The forms below are for people who are not your employees. Whether someone is a contractor or an employee depends on the relationship, not the label. The IRS page Independent contractor (self-employed) or employee? explains the factors. Wages for employees go on Form W-2, not a 1099-NEC.

Step 2: Get a W-9 before the first payment

The IRS page on forms for independent contractors says the first step is to have the contractor complete Form W-9, which gives you their correct name and taxpayer identification number (TIN). The IRS says to keep the W-9 on file for four years.

Collect it up front. If a contractor doesn't provide a TIN as required, or the IRS tells you the TIN is wrong, the IRS says you must withhold 24% (backup withholding) from reportable payments, and then file Form 945.

Ask for W-9s securely. They contain Social Security or employer ID numbers, which are exactly what scammers want. See business email compromise and payment-redirect scams.

Step 3: Decide who needs a 1099-NEC

The Instructions for Forms 1099-MISC and 1099-NEC say you generally report a payment as nonemployee compensation when all four conditions are met:

You paid someone who is not your employee.
You paid for services in the course of your trade or business.
You paid an individual, partnership, estate or, in some cases, a corporation.
Your payments to that payee totaled at least $2,000 during the year.

The instructions say the minimum threshold rose to $2,000 for tax years beginning after 2025, and may be adjusted for inflation starting in 2027. So the $2,000 figure applies to what you pay in 2026 and report in early 2027.

Common exceptions

From the same instructions:

Corporations: payments to a corporation, including an LLC taxed as a C or S corporation, generally don't need a 1099-NEC. Attorneys' fees are a notable exception and are reportable even when the law firm is a corporation.
Card and payment-app payments: payments made with a credit card, debit card or certain third-party networks are reported by the payment company on Form 1099-K, not by you on a 1099-NEC. See our Form 1099-K guide.
Merchandise and similar items: payments for goods, freight, storage and similar items aren't nonemployee compensation.

Step 4: File by January 31

The instructions say Form 1099-NEC must be filed with the IRS by January 31, whether on paper or electronically, and the recipient's copy is due by the same date. If January 31 falls on a weekend or legal holiday, the deadline moves to the next business day.

E-filing: the IRS says you must e-file if you file 10 or more information returns in a calendar year. You can e-file through the IRS's Information Returns Intake System (IRIS) portal. The IRS is retiring its older FIRE system, and says IRIS becomes the only IRS e-filing platform for these returns starting with the 2027 filing season (tax year 2026 returns).

Before you file, you'll need your own business taxpayer ID. See how to get an EIN. Keep copies of what you file. Our guide on how long to keep business records covers retention.

Quick checklist

W-9 on file before the first payment, and kept four years.
A running total per contractor for the year, separating card and payment-app payments.
1099-NEC for each payee paid $2,000 or more in 2026 for services, unless an exception applies.
File and send copies by February 1, 2027, because January 31, 2027 falls on a Sunday (e-file if you have 10 or more returns). See W-2 and 1099-NEC deadlines for 2026 pay.