Preparing for 1099 reporting in 2026? With new reporting thresholds and important filing deadlines approaching, it’s essential for business owners to understand their year-end requirements.
Form 1099 reporting covers a variety of payments, including payments to attorneys, royalties, certain medical and healthcare payments, and even fish purchased for resale. However, for most business owners, 1099s are commonly issued for work performed by independent contractors or rent paid throughout the year.
Understanding how 1099s work and when to issue them can help ensure your business meets its IRS filing requirements.
When Is a Form 1099 Required?
As a general rule, businesses may be required to issue a Form 1099 when they pay someone for services performed in the course of business. This could include equipment installation, repairs, maintenance, or freelance work.
Beginning in 2026, the reporting threshold for many payments reported on Forms 1099-NEC and 1099-MISC has increased from $600 to $2,000. For example, businesses generally must issue Form 1099-NEC when they pay an eligible independent contractor $2,000 or more for services during the year.
Some exceptions, however, do apply.
Businesses generally do not need to issue a Form 1099 for payments made to corporations, unless an exception applies, such as certain payments to attorneys.
Similarly, businesses generally do not issue a Form 1099-NEC for contractor payments made exclusively by credit card or qualifying third-party payment networks. These payments are generally reported by the payment processor instead.
It’s important to remember that reporting requirements can vary depending on the type of payment and the recipient’s tax classification.
Employee vs Independent Contractor
Understanding the difference between an employee and an independent contractor is another important part of year-end reporting.
An employee generally works under the direction and control of an employer. Employees may follow a set work schedule, have their work supervised by the employer, and receive benefits such as health insurance, paid time off, or retirement plans.
Employees receive Form W-2 at the end of the year and generally have payroll taxes withheld from their paychecks.
An independent contractor, on the other hand, generally has more control over how their work is performed. Contractors may establish their own schedules, provide services to multiple clients, and are typically responsible for paying their own taxes.
Independent contractors also generally do not receive traditional employee benefits. Depending on the payments received, they may be issued Form 1099-NEC instead of Form W-2.
However, worker classification depends on the overall working relationship, not simply a person’s schedule, benefits, or how they are paid.
Understanding Forms 1099-NEC and 1099-MISC
Determining which form to issue is an important step in preparing for year-end reporting. Two of the most commonly used forms are 1099-NEC and 1099-MISC.
Form 1099-NEC: Nonemployee Compensation
Form 1099-NEC is primarily used to report payments made to independent contractors for services performed during the year.
For example: ABC Property Management hires John Jones, a self-employed contractor, to provide lawn care services throughout the year.
- Contractor: John Jones Landscaping
- Business Structure: Sole Proprietorship
- Total Paid During the Year: $5,000
- Payment Method: Check
- Form W-9 Received: Yes
Because ABC Property Management paid John Jones more than $2,000 for services during 2026, the business would generally be required to issue Form 1099-NEC.
Form 1099-MISC: Miscellaneous Information
Form 1099-MISC is primarily used to report certain payments, such as rent and royalties.
This form may also be used to report:
- Prizes and awards
- Medical and healthcare payments
- Crop insurance proceeds
- Cash payments for fish or other aquatic life
- Gross proceeds paid to attorneys
- Certain direct sales of $5,000 or more of consumer products for resale
Different reporting thresholds and requirements may apply depending on the type of payment.
Collecting the Information You Need: Form W-9
One of the best ways to gather the information needed for 1099 reporting is through Form W-9. A Form W-9 should generally be completed by the contractor or payee and provides the information necessary to prepare a 1099, including:
- Legal name or business name
- Social Security Number (SSN) or Employer Identification Number (EIN)
- Mailing address
- Federal tax classification
Form W-9 also helps determine how a contractor’s business is classified for federal tax purposes, which can affect whether a Form 1099 is required. For example, an LLC is not automatically exempt from 1099 reporting. Whether a Form 1099 is required generally depends on how the LLC is classified for federal tax purposes and the type of payment made.
Payments to corporations are generally exempt from Form 1099 reporting, although certain exceptions apply.
While Form W-9 is not the only way to obtain contractor information, a good rule of thumb is to request a completed W-9 from any contractor you believe may need to receive a 1099 later.
Form W-9 is not typically filed with the IRS. Instead, businesses should keep completed forms on file for their records. Collecting this information throughout the year can help avoid delays when preparing year-end forms.
Filing Requirements and Important Deadlines
Completed Forms 1099 generally need to be provided to both the IRS and the applicable recipient.
For payments made during 2026, Form 1099-NEC must generally be provided to recipients and filed with the IRS by February 1, 2027. (This year’s deadline is February 1 because January 31 falls on a Sunday in 2027).
Form 1099-MISC has different filing deadlines:
- February 1, 2027: General deadline to provide recipient copies
- March 1, 2027: Deadline for paper filing with the IRS
- March 31, 2027: Deadline for electronic filing with the IRS
Certain payments reported on Form 1099-MISC, including gross proceeds paid to attorneys and substitute payments, have a later recipient deadline of February 16, 2027.
Important Reminder for DJL Clients
To allow sufficient time for preparation and filing, our office requests the following information:
- December 15, 2026: Copies of your contractors’ completed Forms W-9.
- January 6, 2027: Your 2026 contractor and payee information, including total payments made throughout the year.
If you have questions about whether your business needs to issue Forms 1099 or what information is required, the team at DJL Accounting & Consulting Group is here to help.
Preparing early and keeping accurate records throughout the year can help make the 1099 reporting process smoother when January arrives.