The quick checklist

You generally need to send a 1099-NEC to someone for 2026 payments if all of these are true:

  • You paid them in the course of running your business -- not a personal, one-off payment unrelated to your business.
  • They performed services for you and are not your employee (a contractor, freelancer, VA, or similar -- not someone on your payroll).
  • You paid them at least $2,000 in 2026, in total, for those services.
  • You paid by cash, check, ACH, or a similar direct method -- not by credit card, debit card, or a third-party payment network like PayPal (see below -- that changes who reports the payment).
  • They're not a corporation -- with one specific exception for legal fees (see below).

If all five are true, a 1099-NEC is generally expected. If any one of them isn't, read the matching section below -- each exception below is common enough that it changes the answer for a real share of small-business payments, not just an edge case.

The threshold that changed: $600 to $2,000

Confirmed directly on IRS.gov's own instructions page for Forms 1099-MISC and 1099-NEC, in the "What's New" section: "For tax years beginning after 2025, the minimum threshold amount for reporting certain payments required to be reported on certain information returns and/or perform backup withholding on those payments increased to $2,000 and may be adjusted for inflation beginning in calendar year 2027." That covers payments you make during calendar year 2026 -- the forms would be due by January 31, 2027 (see the deadline section below). From 2027 onward, the threshold is scheduled to move with inflation instead of sitting fixed at $2,000.

The same page's specific instructions for the form spell out who it applies to: "File Form 1099-NEC, Nonemployee Compensation, for each person in the course of your business during the year to whom you have paid at least [the threshold amount] in: 1. Services performed by someone who is not your employee (including parts and materials)." In practice: total up what you paid any one non-employee for services over the year. If it's $2,000 or more, that person generally crosses the line into "needs a form."

Source for both quotes: irs.gov/instructions/i1099mec ("Instructions for Forms 1099-MISC and 1099-NEC"), the IRS's own current instructions page.

Who's generally excluded: corporations, with one exception

The same instructions page states the general rule: payments to a corporation (including an LLC that has elected to be treated as a C or S corporation) are generally excluded from 1099-NEC reporting. If the person or business you paid is set up as a corporation, you typically don't need to send them a 1099-NEC at all, regardless of how much you paid them.

There's one specific, named exception: legal services. The same page is explicit that "the exemption from reporting payments made to corporations does not apply to payments for legal services" -- so attorneys' fees get reported on a 1099-NEC (box 1a) even when the law firm is incorporated, when every other corporate payment on your list would be excluded.

This means the corporate-vs-not distinction is worth checking before you assume a form is needed -- a freelancer or sole proprietor you paid $3,000 likely needs a form; an incorporated agency you paid the same amount for the same kind of work likely doesn't, unless it was legal services.

How you paid changes the answer: cards and PayPal work differently

This is the exception that resolves the NEC-vs-K confusion for a lot of small businesses. The same IRS instructions page states, under its "Form 1099-K" reminder: "Payments made with a credit card or payment card and certain other types of payments, including third-party network transactions, must be reported on Form 1099-K by the payment settlement entity under section 6050W and are not subject to reporting on Form 1099-MISC or Form 1099-NEC."

In plain terms: if you paid a contractor through a credit card, debit card, or a service like PayPal's business/goods-and-services flow, the payment processor -- not you -- is the one on the hook for reporting that payment, and it reports it on a 1099-K, not a 1099-NEC. The 1099-K threshold is a separate, much higher figure ($20,000 and 200 transactions, unchanged for 2026 -- see the next section), so a contractor you pay $3,000 through PayPal might not get any form at all from either you or the processor, even though the same $3,000 paid by check would put you on the hook for a 1099-NEC. That's not a loophole this article is recommending -- it's simply how the two forms' reporting responsibilities are divided, and it's worth knowing which bucket your actual payment method falls into before assuming you're in the clear either way.

This is a different form -- and a different threshold -- than the 1099-K

It's easy to mix these up, because both changed recently and both are information returns. A 1099-NEC is issued by you, the business that paid someone directly for services. A 1099-K is issued by a payment processor (a credit card network, PayPal, Etsy Payments) for payments it settled, as described above. The 1099-K threshold did not change for 2026: it stays at $20,000 and 200 transactions, per two independent IRS.gov newsroom pages (one, two). If you're asking this question from the other side -- you're the one who might receive a 1099-NEC or 1099-K, not send one -- our companion guide on the 2026 threshold change and state-by-state filing patchwork covers the recipient side directly, including which states still run their own, lower thresholds.

State filing rules are a separate question -- kept deliberately brief here

Everything above is the federal rule. Several states run their own, separate information-return filing requirements with their own dollar thresholds, enforced by the state tax agency independently of what the IRS just changed -- and at least a few of those state thresholds are lower than the new federal $2,000 figure, meaning a payment that clears the federal bar might still trigger a state filing obligation at a lower number. This article deliberately doesn't restate specific state figures here, because getting that list right (and clearly labeling which numbers are actually confirmed against the state's own page, versus repeated from secondary sources) is a bigger job than one section of a payer's checklist can do responsibly. Our companion guide, 1099-NEC Threshold Rises to $2,000 in 2026 -- But Some States Still Require $600, has that state-by-state detail, with every figure labeled by how well it's confirmed (primary-verified, secondary-sourced only, or couldn't verify) rather than presented as one flat, equally-trustworthy list.

The deadline, and when you have to e-file instead of paper-file

The same instructions page states the filing date plainly: "Section 6071(c) requires you to file Form 1099-NEC on or before January 31, using either paper or electronic filing procedures." The page separately confirms the same date for getting the form to the payee: "You are required to furnish the payee statements and file with the IRS by January 31." For 2026 payments, that means both copies -- to the IRS and to the person you paid -- are due by January 31, 2027, with no separate, later deadline for the recipient copy the way some other information returns have.

On paper vs. electronic filing: the same page notes a rule that predates this year's threshold change but still applies -- "T.D. 9972, published February 23, 2023, lowered the e-file threshold to 10 (calculated by aggregating all information returns), effective for information returns required to be filed on or after January 1, 2024." In practice, once you're filing 10 or more information returns of any kind for the year (not just 1099-NECs -- it's an aggregate count across your information-return filings), you're required to file electronically rather than on paper. A small business issuing a handful of 1099-NECs may still be under that count; one issuing many, or issuing other information returns too, should check the aggregate before assuming paper filing is still an option.

Every quote and figure in this article's federal-rules sections is sourced to a single page: IRS.gov's Instructions for Forms 1099-MISC and 1099-NEC (current version, fetched directly for this article) -- the "What's New" threshold language, the "Specific Instructions for Form 1099-NEC" filer/payee language, the corporation exception and its legal-services carve-out, the Form 1099-K payment-method reminder, the Section 6071(c) filing-date language, and the T.D. 9972 e-file-threshold language. The 1099-K contrast figures ($20,000 / 200 transactions) are sourced separately to two IRS.gov newsroom pages, linked above.

What this checklist doesn't cover

This article is about the federal reporting threshold and who's excluded from it -- it doesn't attempt to resolve the separate, harder question of whether someone you paid is legally a contractor or should have been treated as an employee in the first place (a determination the IRS and your state make with their own tests, not this article), and it states no penalty amounts for late or missing filing, since that figure wasn't independently verified for this piece and an unconfirmed number would be worse than none. If either of those applies to your situation, that's a conversation for a licensed tax professional, not a guide like this one.