Form 1099-NEC: who has to file it, and how do I report one I received?
If your business pays a non-employee for services, you must issue Form 1099-NEC once the year's total reaches $600 for payments made in 2025, or $2,000 for payments made in 2026 and later. It's due January 31 of the following year (February 1 in 2027). If you receive one, you report the income on Schedule C and owe about 15.3% self-employment tax on top of income tax. Income without a 1099 is still taxable.
- $600
- Filing threshold for payments made in 2025
- $2,000
- Filing threshold for payments made in 2026 and later
- Jan 31
- Due date, the year after payment (moves to Feb 1 in 2027)
- ~15.3%
- Self-employment tax recipients owe in addition to income tax
At a glance
- Payers issue 1099-NEC at $600 for 2025 payments and $2,000 for payments from 2026 on. The year you paid decides which threshold applies.
- The form goes to both the contractor and the IRS by January 31 of the following year. For 2026 payments, that's February 1, 2027.
- Recipients report the income on Schedule C and pay roughly 15.3% self-employment tax on net profit.
- Income without a 1099 is still reportable. The threshold tells the payer whether to file. It doesn't tell you whether to report.
- Well-organized expenses lower both income tax and self-employment tax.
What is Form 1099-NEC, and who has to file it?
Form 1099-NEC reports nonemployee compensation. When a business pays an independent contractor for services and the year's total reaches the threshold, the business sends one copy to the contractor and files another with the IRS.
Typical examples are a restaurant paying an outside cleaning crew, a contractor paying subs, a clinic paying a part-time therapist, or a small company hiring a freelance web designer. You generally don't file a 1099-NEC for:
- Employees. They get a W-2.
- Payees taxed as C or S corporations, except attorneys. Legal fees are reportable even when paid to a law firm.
- Payments made by credit card or through a payment platform such as PayPal. The platform reports those on Form 1099-K.
- Personal payments, such as hiring someone to remodel your own home.
- Rent, which goes on Form 1099-MISC.
Read from the top; follow the first row that fits.
| Your situation | Result |
|---|---|
| Not a payment for services made in the course of your business | No form |
| The payee is your employee | Issue a W-2 |
| The payee is taxed as a C or S corporation | Generally no form (attorney fees excepted) |
| You paid by credit card or a payment platform | The platform issues a 1099-K |
| Your total payments to them for the year did not reach the threshold ($600 for 2025 payments, $2,000 for 2026 and later) | No form |
| Your total payments to them for the year reached the threshold | Give Form 1099-NEC to the payee and file it with the IRS by January 31 of the next year |
How does the change from $600 to $2,000 work?
It depends on when you made the payment. Payments made during 2025 use the $600 threshold. Payments made on or after January 1, 2026 use $2,000.
So the 1099s issued in early 2026 (covering 2025) still used $600, and the ones issued in early 2027 (covering 2026) use $2,000. The threshold is a rule for the payer. It has nothing to do with whether the person receiving the money has to report it.
When is it due, and how do I file?
The deadline is January 31 of the year after payment, for both the recipient copy and the IRS filing. Because January 31, 2027 is a Sunday, 1099s for 2026 payments are due February 1, 2027.
A process that works:
- Get a W-9 before you pay anyone. It gives you the payee's name, TIN (SSN or EIN) and tax classification. Chasing it in January rarely goes well.
- Track payments by payee all year, and separate bank and check payments from card and platform payments.
- Run the totals in January against the threshold and list who needs a form.
- E-file through the IRS IRIS portal and deliver copies to recipients the same day.
I received a 1099-NEC. How do I report it?
A 1099-NEC means the IRS sees you as self-employed. You report the income on Schedule C, subtract business expenses to get net profit, and pay income tax plus about 15.3% self-employment tax (Social Security and Medicare, figured on Schedule SE).
Read the steps in order; the step 3 net profit splits into 4a and 4b, and both taxes apply.
| Step | What it is |
|---|---|
| 1. All business income | Every 1099-NEC plus income with no 1099 (transfers, cash, platform payouts) |
| 2. Minus business expenses | Subtracted from all business income |
| 3. Schedule C net profit | Step 1 minus step 2 |
| 4a. Income tax | Form 1040 |
| 4b. Self-employment tax | ~15.3% (Schedule SE) |
| 5. Reminder | Pay quarterly estimated tax to avoid an underpayment penalty |
Keep in mind:
- Income without a 1099 is still taxable, whether the payer forgot, got it wrong or was under the threshold.
- Half of your self-employment tax is deductible in figuring AGI, but it's still real money out the door, which is why expense tracking matters so much.
- Nothing is withheld from 1099 income, so you'll usually need quarterly estimated payments (see our guide on estimated taxes).
What expenses can a self-employed person deduct?
Ordinary and necessary business expenses are deductible, as long as you have records showing what they were for. Common ones include:
- Computers, cameras, tools and other equipment, plus software and subscriptions
- The business share of your phone and internet
- A home office used regularly and exclusively for the business
- Business use of a vehicle (actual expenses or the standard mileage rate, not both)
- Legal and accounting fees
- Advertising, website costs and platform fees
- Business travel and training
- Payments to your own contractors (and yes, you may owe them a 1099)
- Self-employed health insurance and SEP or Solo 401(k) contributions, if you qualify
Running personal and business spending through the same card is the most common way people lose deductions, either by missing them or by claiming them without support.
Key rules at a glance
| Situation | Amount / date | What to do | Applies to |
|---|---|---|---|
| Payer filing threshold | $600 | Issue 1099-NEC once the year's payments to one contractor reach this amount | Payments made in 2025 |
| Payer filing threshold | $2,000 | Same rule, higher threshold | Payments made in 2026 and later |
| Due date | January 31 | Recipient copy and IRS filing, year after payment | Every year |
| Due date for 2026 payments | February 1, 2027 | January 31 falls on a Sunday | Payments made in 2026 |
| Recipient reporting | Schedule C | Report income, deduct expenses, figure net profit | Every year |
| Self-employment tax | ~15.3% | Figured on net profit on Schedule SE, on top of income tax | Tax year 2026 |
| Income with no 1099 | Still reportable | The threshold doesn't change the recipient's obligation | Every year |
Common mistakes
"No 1099, no tax."
All business income is reportable. The IRS only sees what payers send in. Your bank statements show the full picture.
"The threshold is $2,000 now, so I don't have to report less than that."
The $2,000 is the payer's filing threshold. Recipients report every dollar.
"1099 income is only subject to income tax."
There's also roughly 15.3% self-employment tax. Every documented expense lowers both.
"Every payment needs a 1099-NEC."
Employees get W-2s. Payees taxed as C or S corporations generally don't get one (attorneys excepted). Card and platform payments are covered by the 1099-K. Collect a W-9 and decide from there.
Missed a 1099, got a wrong one, or not sure how to report? Here's what to do
First, are you the payer or the payee? The steps are different.
- Situation A: Your business missed or botched a 1099. File the missing form or a corrected form as soon as possible, to both the IRS and the recipient. Late-filing penalties step up the longer you wait. Going forward, get a W-9 before the first payment.
- Situation B: The amount on your 1099 is wrong. Ask the payer for a corrected form. Report what you actually received and keep the bank records that support it.
- Situation C: First year with 1099 income. Match every 1099 against your bank deposits and add any income that wasn't reported. Sort the year's expenses into Schedule C categories. File Schedule C and Schedule SE, and start quarterly estimates next year.
We file 1099s for businesses and help freelancers keep more of what they earn
For businesses, we collect W-9s, check the thresholds, and prepare and e-file your 1099-NECs on time. For the self-employed, we prepare your return, find every legitimate deduction, and organize the year's expenses into a Schedule C expense report. Already have an accountant? We can do just the expense cleanup and hand the report to them.
- Big Four background, 15+ years in U.S. tax, credentialed as CPA, EA and CAA
- 1099-NEC filing from start to finish: W-9s, threshold review, IRIS e-filing, recipient copies
- Expense cleanup by Schedule C category, with a report your own accountant can use
- Estimated tax planning so next year doesn't bring a penalty
How it works
- 1
Free assessment
A 15-minute call to sort out whether you need to issue 1099s, report them, or both.
- 2
Documents
Payment records and W-9s, or bank statements, card statements and platform reports. We send you a checklist.
- 3
1099s and expense report
1099-NECs filed before the deadline, and expenses coded into a Schedule C expense report.
- 4
File, or hand off
We file Schedule C and SE, or deliver the expense report to your accountant, and set up next year's estimates.
FAQ
How much do I have to pay a contractor in 2026 before I need to file a 1099-NEC?
For payments made in 2026 and later, the threshold is $2,000 per contractor for the year. For payments made in 2025, it was $600. Forms for 2026 payments are due February 1, 2027.
I didn't get a 1099. Do I still have to report the income?
Yes. All business income is reportable, whether or not a 1099 was issued and whatever the amount.
What do I owe on 1099 income besides income tax?
About 15.3% self-employment tax, figured on your Schedule C net profit using Schedule SE. That's why good expense records matter so much for the self-employed.
Do I need to send a 1099-NEC to an LLC?
It depends on how the LLC is taxed. Single-member LLCs and LLCs taxed as partnerships generally get one. LLCs taxed as C or S corporations generally don't, except for legal fees. A W-9 tells you which it is.
Can YCL help me with this?
Yes. We prepare and file 1099-NECs, help self-employed clients file and claim every deduction, and organize expenses into a Schedule C expense report you can give to your own accountant. Book a free 15-minute call to start.
Related guides
Sources
- IRS: Instructions for Forms 1099-MISC and 1099-NEC (irs.gov)
- IRS: Form W-9, Request for Taxpayer Identification Number and Certification
- IRS: Information Returns Intake System (IRIS)
- IRS: Schedule C (Form 1040) and instructions; Schedule SE (Form 1040)
- IRS: Publication 334, Tax Guide for Small Business
- IRS: Self-Employment Tax (Social Security and Medicare Taxes)
Not sure whether you need to file, or what you can deduct?
Book a free 15-minute call. A CPA will look at your situation, with no fee and no sales pitch.