“Do I have to send my subs a 1099?” Often, yes. But the number that decides it just changed. For years the line was $600 a year to one payee. A 2025 tax law raised it to $2,000 for payments made after December 31, 2025, so the forms you send in early 2027, for what you paid in 2026, are the first under the new number.
This article covers who gets a Form 1099-NEC, how the new threshold works, the W-9 to collect before the first check, when backup withholding applies, and the deadline. If you are not sure the person is a sub at all rather than an employee, start with 1099 or W-2? first.
What the 2025 law changed
Public Law 119-21, signed July 4, 2025, did it in section 70433. It struck “$600” from section 6041(a) of the tax code and wrote in “$2,000”. It applied the same figure to reporting payments for services under section 6041A, and to backup withholding under section 3406. And it added an inflation adjustment: for any calendar year after 2026, the $2,000 rises with the cost of living, rounded to the nearest $100. The changes apply to payments made after December 31, 2025.
| Payments made in | Forms due in early | Threshold per payee |
|---|---|---|
| 2025 | 2026 | $600 |
| 2026 | 2027 | $2,000 |
| 2027 and later | The next year | $2,000, adjusted for inflation |
The IRS instructions for Forms 1099-MISC and 1099-NEC, in the December 2026 revision used to file 2026 information in early 2027, say the same: the threshold rose to $2,000 for tax years beginning after 2025 and may be adjusted for inflation beginning in calendar year 2027. Check each year’s instructions for the figure.
Who gets one: four conditions
The instructions say you must generally report a payment as nonemployee compensation (box 1a of Form 1099-NEC) when all four are true:
- The payee is not your employee.
- You paid for services in the course of your trade or business. Personal payments, such as a sub you hire for your own house, are not reportable.
- You paid an individual, a partnership, an estate or, in some cases, a corporation.
- You paid that payee at least $2,000 during the year.
Two details catch contractors out. A sub’s invoice that includes parts or materials counts in full when supplying them was incidental to the service. And the instructions list payments that are not reported on the form, among them, generally, payments to a corporation (including an LLC treated as a C or S corporation), and payments for merchandise, freight and storage.
Payments by card, and some payments through apps, are a separate case. The instructions say payments made with a credit card or payment card, and certain other types including third-party network transactions, are reported on Form 1099-K by the payment settlement entity, not on Form 1099-MISC or 1099-NEC by you. Not every app payment is necessarily a third-party network transaction, so ask your tax preparer before you leave an app-paid sub off your list.
A worked year
Say a remodeler paid these in 2026:
| Payee and how paid | Paid in 2026 | 1099-NEC? |
|---|---|---|
| Tile setter, sole proprietor, by check | $6,400 | Yes |
| Drywall company, LLC whose W-9 checks the S corporation box, by check | $11,000 | Generally no: treated as a corporation |
| Electrician, sole proprietor, by check | $1,800 | No: under $2,000 (it would have been yes at $600) |
| Painter, paid only by credit card | $3,000 | Not by you: a card payment goes on Form 1099-K |
| Lumber yard, for material | $22,000 | No: merchandise |
| Attorney, for collecting an unpaid invoice | $2,500 | Yes, even if a law firm is a corporation |
The attorney line is the exception to the corporation rule: the instructions say attorneys’ fees of $2,000 or more paid in the course of your business go in box 1a of Form 1099-NEC, and the term “attorney” includes a law firm. The electrician line has its own exception: if you withheld any federal income tax under backup withholding, you file a 1099-NEC for that person whatever the amount.
Get the W-9 before the first check
Everything above depends on two facts you only learn from the payee: the taxpayer identification number and the tax classification. Form W-9 collects both, and it is far easier to get before you pay than in January.
When backup withholding applies
The W-9 requester instructions list when a payer is subject to backup withholding: the payee fails to furnish a TIN, the IRS notifies you the TIN is incorrect, there has been a notified payee underreporting of interest or dividends, or the payee fails to certify that it is not subject to backup withholding. Form W-9 itself says the last two apply to reportable interest and dividends only, so for a sub the triggers are a missing TIN and an IRS notice that the TIN is wrong. The rate is 24%. A payer must withhold 24% of reportable payments to that payee and deposit it with the IRS until the cause is remedied, and a payer who does not withhold as required may become liable for the uncollected amount.
The 2025 law tied this to the new threshold: section 70433 replaced the $600 in the backup withholding rule for these payments with the reporting threshold in effect for the year. In practice, a sub who will not hand over a W-9 is a sub whose pay you may have to cut by 24% and send to the IRS. Saying that in writing before the job starts gives the sub a reason to return the form.
The deadline, and why 2027’s is February 1
The instructions say you must furnish the payee’s copy and file Form 1099-NEC with the IRS by January 31, and that when a date falls on a Saturday, Sunday or legal holiday, the due date is the next business day. January 31, 2027 is a Sunday, so the forms for 2026 payments are due Monday, February 1, 2027.
What being late costs
The IRS charges separate penalties for failing to file a correct information return on time and for failing to provide a correct payee statement on time, for each form. Its table for returns due in 2026 lists $60 per return up to 30 days late, $130 from 31 days late through August 1, $340 after August 1 or not filed, and $680 for intentional disregard. The amounts change from year to year, so check the table for 2027. Publication 1099 adds that the filing penalty also applies to reporting an incorrect TIN, failing to report a TIN, and filing on paper when you were required to e-file, and that it does not apply to a failure you can show was due to reasonable cause and not willful neglect.
A routine that takes an hour a year
- Before the first payment: W-9 in hand, name and number matched, classification noted.
- Every payment: record the payee and how you paid (check, bank transfer, cash, card or app).
- In December: total each payee’s payments that will not be on a Form 1099-K, and mark everyone at $2,000 or more who is not a corporation, plus any attorney.
- In January: prepare the forms, send the payee copies, and file by February 1, 2027.
Your state may want its own copy; ask its revenue department whether the Combined Federal/State Filing Program covers it.
General information, not legal or tax advice. Rules change and vary by state; check with the agency named above or a professional for your situation.