If you run a small business, you’ve probably heard the term “1099” thrown around—especially when tax season approaches.

Maybe you hired a freelance designer. Perhaps you paid a contractor to renovate your office. Or you brought in a virtual assistant, consultant, photographer, or other independent professional during the year.

Then someone asks, “Are you sending them a 1099?”

Suddenly, bookkeeping gets a little more complicated.

The good news is that 1099 reporting doesn’t have to be confusing. Once you understand who generally needs a 1099, which form to use, how much you need to pay before reporting is required, and when the forms are due, the process becomes much easier.

There is also an important change for small businesses to know about in 2026: the federal reporting threshold for many payments reported on Forms 1099-NEC and 1099-MISC increased to $2,000 for payments made in 2026.

Here’s what you need to know.

What Is a 1099?

A 1099 is an information return used to report certain types of payments made during the year.

Unlike a W-2, which generally reports wages paid to employees, various 1099 forms report payments or other financial information that may need to be reported to the IRS and the recipient.

There are several types of 1099 forms, but small business owners will commonly encounter:

• Form 1099-NEC – generally used for nonemployee compensation
• Form 1099-MISC – used for certain miscellaneous payments, such as qualifying rents, prizes, awards, and certain other payments
• Form 1099-K – generally associated with payments processed through payment cards and certain third-party networks

The important thing to understand is that not every person you pay gets a 1099.

The type of payment, who received it, how it was made, and the circumstances surrounding the transaction all matter.

Who Usually Gets a 1099-NEC?

Form 1099-NEC is most commonly associated with independent contractors.

Generally, if your business pays someone who isn’t your employee for services, the payment may need to be reported on Form 1099-NEC.

Examples might include:

• Freelance writers
• Graphic designers
• Independent consultants
• Web developers
• Photographers
• Marketing professionals
• Handymen or contractors
• Accountants
• Other independent service providers

For payments made during 2026, the general federal threshold for nonemployee compensation reported on Form 1099-NEC is $2,000 or more.

That is a significant change from the $600 threshold that applied to payments made before 2026.

A Simple Example

Suppose your business hired a freelance graphic designer in 2026 and paid them $3,500 for business-related design work.

Assuming the payment otherwise meets the reporting requirements, it generally falls under the 1099-NEC reporting rules.

Now imagine you paid another freelancer $1,200 during 2026.

The federal $2,000 threshold for 2026 means the payment would generally not meet the threshold for 1099-NEC reporting based solely on the amount, although other reporting rules may apply in certain situations.

Always consider the nature of the payment rather than relying on the dollar amount alone.

What About Form 1099-MISC?

Form 1099-MISC is used for certain payments that don’t fall under the 1099-NEC rules.

For example, businesses may use it for qualifying:

• Rent payments
• Prizes and awards
• Certain medical and health care payments
• Certain other income payments
• Certain attorney-related payments
• Certain other reportable transactions

For many categories of payments made in 2026, the threshold is also $2,000, although some categories have different thresholds. For example, royalties generally have a $10 reporting threshold, while certain attorney payments are subject to specific rules.

This is why you shouldn’t assume that every 1099-MISC has a single universal dollar limit.

1099-NEC vs. 1099-MISC

Here’s a quick way to think about the difference:

Form	Common Use	2026 General Threshold	Typical Deadline
1099-NEC	Nonemployee compensation	$2,000	January 31
1099-MISC	Rent, certain awards, other qualifying payments	Often $2,000	Varies by filing method
1099-K	Certain payment-card/third-party network transactions	Separate rules	Generally handled by payment settlement entity

The IRS notes that Form 1099-NEC is due to both the IRS and recipient by January 31. If January 31 falls on a weekend or applicable holiday, the deadline moves to the next business day.

For Form 1099-MISC, the IRS generally lists February 28 for paper filing and March 31 for electronic filing, with recipient statements generally due January 31. Special rules and exceptions can apply.

The 1099 Deadline You Don’t Want to Miss

For most small businesses, January is the month to pay attention to.

If you need to issue a 1099-NEC for 2026 payments, the general deadline is:

January 31, 2027

That deadline applies to filing the form with the IRS and furnishing it to the recipient. If the date falls on a weekend or applicable legal holiday, the deadline moves to the next business day.

This is why waiting until the last week of January can be risky.

You may suddenly discover that you don’t have a contractor’s correct legal name, taxpayer identification number, or mailing information.

Give yourself time to fix those problems.

Do You Need to Send a 1099 to a Corporation?

This is one of the questions that confuses.

Generally, payments to corporations—including many LLCs that are treated as C or S corporations—are exempt from many Form 1099-NEC and 1099-MISC reporting requirements.

But there are important exceptions.

For example, certain payments for medical and health care services and payments to attorneys can still be reportable even when the recipient is an incorporated entity.

So don’t use the shortcut:

“They’re a corporation, so I never need a 1099.”

That can be wrong.

The type of service and payment matters.

What Is Form W-9 and Why Do You Need It?

One of the best ways to avoid 1099 problems is to collect a Form W-9 from independent contractors before you pay them.

A W-9 provides information such as the contractor’s:

• Legal name
• Business name, when applicable
• Federal tax classification
• Taxpayer identification number
• Address

You generally use the information from the W-9 when preparing the 1099.

Don’t wait until January to start tracking down this information.

Make collecting a W-9 part of your onboarding process.

A Simple Contractor Workflow

Before work begins → Collect W-9 → Make payments → Track total paid → Review reporting requirements → Prepare 1099 → File and furnish forms

That simple system can save you a lot of scrambling later.

Don’t Assume Your Bookkeeping Software Handles Everything

Many accounting platforms can help with preparing or filing 1099s.

That’s useful—but don’t assume the software automatically knows every reporting decision your business needs to make.

You still need accurate records.

For example, your bookkeeping system should distinguish between:

• Contractor payments
• Employee wages
• Rent
• Supplies
• Equipment
• Reimbursements
• Personal expenses
• Payments made through certain payment processors

If everything has been lumped into a single generic expense category, preparing 1099s becomes much harder.

Good bookkeeping throughout the year makes year-end reporting much easier.

Be Careful With Credit Cards and Payment Platforms

Here’s another common source of confusion.

If you paid a contractor by credit card or through certain payment-card or third-party network arrangements, the payment may be subject to Form 1099-K reporting by the payment settlement entity, rather than being reported by you on Form 1099-NEC for the same payment.

The IRS specifically notes that payments made by credit card and certain other payment-card or third-party network transactions are generally reported on Form 1099-K and aren’t subject to duplicate reporting on Form 1099-MISC or 1099-NEC.

This is one reason you shouldn’t simply look at your bookkeeping expense totals and automatically issue a 1099 for every contractor payment.

Look at how the payment was made.

Common 1099 Mistakes Small Businesses Make

A few mistakes recur.

Mistake #1: Using the Old $600 Rule

If you’re preparing 1099s for 2026 payments, don’t automatically apply the old $600 threshold.

The federal threshold for many 1099-NEC and 1099-MISC payments increased to $2,000 for payments made in 2026.

However, special categories can have different thresholds, so don’t treat $2,000 as a universal rule.

Mistake #2: Waiting Until January to Collect W-9s

Tracking down tax information at the last minute is frustrating.

Collect the W-9 when you onboard the contractor.

Mistake #3: Confusing Employees With Contractors

You don’t simply decide someone is an independent contractor because that’s what you want to call them.

Worker classification is a separate issue governed by applicable rules.

Employees generally receive W-2s rather than 1099-NECs for their wages.

If you’re unsure how someone should be classified, ask a qualified tax professional before issuing tax forms.

Mistake #4: Forgetting About Attorneys

Attorney payments have special reporting rules.

Certain payments for legal services can be reportable even when the recipient is a corporation. The IRS instructions distinguish between attorney fees reported on Form 1099-NEC and certain gross proceeds paid to attorneys reported on Form 1099-MISC.

Mistake #5: Reporting the Wrong Amount

Before filing, compare your 1099 totals against your bookkeeping records.

A simple spreadsheet or year-end report can help you verify:

Contractor	Total Payments	Payment Method	W-9?	Potential 1099?
Contractor A	$4,200	ACH	Yes	Review
Contractor B	$900	Credit card	Yes	Review payment method
Contractor C	$2,750	Check	Yes	Review
Contractor D	$600	ACH	No	Obtain information

The point isn’t to issue forms based on the table without thinking. It’s to create a review process before filing.

What Happens If You Make a Mistake?

Don’t panic.

If you discover that you filed a 1099 with incorrect information, there are correction procedures.

The important thing is to address the error rather than ignore it.

Common issues include:

• Incorrect taxpayer identification number
• Wrong name
• Wrong dollar amount
• Incorrect form
• Duplicate filing
• Missing recipient information

If you discover an error, review the IRS correction instructions or contact your tax professional to determine the appropriate correction.

Can You File 1099s Electronically?

Yes.

The IRS provides electronic filing options for information returns, including its IRIS system.

Electronic filing can be particularly useful if your business has multiple information returns to submit.

There are also commercial tax and accounting services that can prepare and transmit forms.

Just make sure you’re using a filing method that meets current IRS requirements.

A Simple 1099 Checklist for Small Businesses

Before you submit your forms, go through this checklist.

Contractor Information

• Identify everyone your business paid for services.
• Confirm whether they were employees or nonemployees.
• Collect or review their W-9 information.
• Confirm their legal name and taxpayer identification number.

Payment Review

• Calculate total payments for the year.
• Check which payments are reportable.
• Review payment methods.
• Check whether special reporting rules apply.
• Review payments to attorneys and other special categories.

Filing

• Select the correct 1099 form.
• Enter the correct amount.
• Verify recipient information.
• File with the IRS by the applicable deadline.
• Furnish the recipient’s copy by the applicable deadline.
• Keep copies and supporting records.

When Should You Start Preparing 1099s?

Ideally, don’t wait until January.

A much better system is to prepare throughout the year.

When You Hire a Contractor

Collect their W-9.

Throughout the Year

Record payments accurately and keep track of how those payments were made.

December

Run a contractor payment report and identify potential 1099 recipients.

Early January

Verify information, prepare forms, and resolve missing details.

Before the Deadline

File the forms and furnish recipient copies.

This approach turns 1099 preparation into a routine bookkeeping task instead of a January emergency.

Do You Need a Bookkeeper for 1099s?

If you only work with one or two contractors, you may be able to handle your 1099 process yourself.

But professional bookkeeping support can become valuable when your business works with numerous contractors or has complicated payment arrangements.

A bookkeeper can help you:

• Track contractor payments
• Keep vendor information organized
• Reconcile accounts
• Identify potential 1099 recipients
• Prepare information for filing
• Catch bookkeeping inconsistencies

Your accountant or tax professional can help when you’re dealing with classification questions, unusual transactions, corrections, or other tax-related issues.

Final Thoughts

1099 reporting doesn’t need to be a yearly headache.

The biggest mistake is waiting until January to figure everything out.

Collect W-9s early. Keep contractor payments organized. Pay attention to payment methods. Review your records before filing. And most importantly, don’t rely on outdated information—especially when it comes to reporting thresholds.

For 2026 payments, the general federal threshold for many 1099-NEC and 1099-MISC reporting situations is now $2,000, up from the $600 threshold used in many earlier tax years. But exceptions and special categories exist, so always check the current IRS rules for your specific situation.

A little organization throughout the year can make the difference between a smooth January and a frantic one.

And when in doubt, don’t guess. A quick conversation with a qualified tax professional can be much cheaper than trying to fix a reporting mistake later.