Year-end · 3 minute read
1099-NEC rules for contractors in 2026: the $2,000 threshold and the February 1 deadline
For payments made in 2026, you file a Form 1099-NEC for each unincorporated subcontractor or service vendor you paid $2,000 or more, up from $600 in prior years. The forms are due to the IRS and to each sub by February 1, 2027, because January 31 falls on a Sunday.
The threshold jumped from $600 to $2,000 for 2026 payments
The One Big Beautiful Bill Act raised the reporting threshold for Forms 1099-NEC and 1099-MISC. It applies to payments made during 2026, so the first forms affected are the ones filed in early 2027.
Starting with 2027 payments, the $2,000 figure will be adjusted for inflation each year.
For a contractor, that means fewer forms for small one-off vendors. Most regular subs will still clear $2,000 easily.
Who generally gets a 1099-NEC
- Subcontractors who are sole proprietors or single-member LLCs taxed as sole proprietors
- Partnerships you paid for services
- Attorneys, even when the firm is a corporation
The test is payments for services, made in the course of your business, that total $2,000 or more for the year.
Who generally doesn't
- Most corporations, including S corporations (attorneys are the big exception)
- Suppliers you bought materials or merchandise from
- Anyone you paid by credit card or through a payment app like PayPal, because the card processor reports those payments instead
- Your employees, who get a W-2
Edge cases come up constantly in construction, like a sub who bills labor and materials together. Your CPA makes the final call on those, and we flag them for review.
Get the W-9 before the first check, every time
A W-9 gives you the sub's legal name, tax classification and taxpayer ID number. It's what tells you whether they need a 1099 at all.
Collecting it before the first payment costs one email. Collecting it in January, from a sub who has moved on to another job, costs a week of phone calls.
If a sub refuses to give you a taxpayer ID, the IRS can require you to withhold 24% of what you pay them as backup withholding. A W-9 on file avoids that mess entirely.
A year-round 1099 routine that actually works
- Request a W-9 from every new sub before their first payment.
- Pay subs by check or bank transfer from accounts your bookkeeper can see, and code each payment to the sub and the job.
- Run a vendor payments report every quarter to catch anyone missing a W-9.
- In December, review every vendor near or over $2,000.
- File and send the forms in January, ahead of the February 1, 2027 deadline.
Steps two and three happen naturally during a proper monthly close. That's why W-9 tracking and 1099-NEC filing are included in our Job Profit plan all year, not just in January.
Late or missing 1099s cost real money
The IRS charges a penalty for each late or incorrect information return, and the penalty grows the longer it stays late. Missing a dozen subs adds up fast. Filing on time is far cheaper than fixing it later.
Washington contractors have their own tax rules on top of this
The 1099 is a federal form. If you work in Washington, sales tax and B&O tax on construction follow a separate set of state rules, covered in Washington sales tax and B&O basics for contractors.
What to do next
Pull a list of every sub you paid this year and check how many W-9s you actually have on file. If the answer is "not many," start now.
The Year-End Rescue collects missing W-9s, closes the year and prepares your 1099-NECs. It runs until January 15. Our January CPA checklist covers everything else your CPA will ask for.
This article is general information based on IRS rules as of October 2026, not tax advice. Confirm your filing requirements with your CPA.