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Contractor 1099s for Subs: The $2,000 Threshold for 2026

For payments made in 2026, a contractor files Form 1099-NEC for each subcontractor paid $2,000 or more, up from $600. Forms are due February 1, 2027. Get a W-9 before paying, or backup withholding at 24% may apply.

Askia Roberts, CPA · GA License #CPA038784 ·

For payments made in 2026, a contractor generally has to file Form 1099-NEC for each subcontractor paid $2,000 or more during the year, up from the old $600 threshold. The forms are due to the subs and to the IRS by February 1, 2027. The work that makes that date easy happens now: a W-9 on file for every sub, and a running total of what each one was paid and how.

What Changed for 2026

The IRS Form 1099-NEC instructions state that for tax years beginning after 2025, the minimum reporting threshold for these payments increased to $2,000 and may be adjusted for inflation beginning in 2027 (IRS, Instructions for Forms 1099-MISC and 1099-NEC).

You report a payment as nonemployee compensation when all four conditions are met:

  1. You paid someone who is not your employee.
  2. The payment was for services in the course of your trade or business.
  3. You paid an individual, partnership, estate or, in some cases, a corporation.
  4. You paid that payee at least $2,000 during the year.

What Counts Toward the $2,000

  • Labor, plus incidental materials. Box 1a includes “payment for parts or materials used to perform the services if supplying the parts or materials was incidental to providing the service.”
  • Not card or app payments. Payments by credit card, debit card or a third party network are reported by the processor or app on Form 1099-K, not by you on Form 1099-NEC.
  • Not most corporations. Payments to corporations are generally not reportable, other than attorneys’ fees. A sub that is an LLC may still be reportable, so the W-9 tells you how it is classified.
  • Cash counts. Paying in cash does not remove the reporting requirement. How you paid matters only for the card and app rule above.

The W-9 and Backup Withholding

The IRS suggests requesting Form W-9 from each U.S. payee (IRS, General Instructions for Certain Information Returns). If a payee doesn’t provide a correct taxpayer identification number, the payer may be required to withhold at 24 percent on nonemployee compensation (IRS, Backup Withholding). That withholding becomes your responsibility once the requirement applies. Getting the W-9 before the first payment keeps it from coming up.

The Deadline

Form 1099-NEC is due to the recipient and to the IRS by January 31. When that date falls on a weekend or legal holiday, it moves to the next business day (IRS, General Instructions). January 31, 2027 is a Sunday, so 2026 forms are due February 1, 2027. If you are filing 10 or more information returns in total, you must file them electronically.

What to Do Before December 31

  1. Pull a 2026 sub list from your books with totals paid per sub and payment method.
  2. Separate card and app payments from check, ACH, wire and cash.
  3. Flag every sub at or near $2,000 in non-card payments.
  4. Collect missing W-9s now, while you are still paying the sub and have leverage to get the form.

Sources

Educational content only. Not tax, legal, or investment advice. Tax strategies depend on your specific facts and circumstances. Consult a qualified professional regarding your situation. Past results do not guarantee future outcomes.

Common questions

What is the 1099-NEC threshold for subcontractors in 2026?

$2,000. The IRS Form 1099-NEC instructions raise the nonemployee compensation threshold from $600 to $2,000 for tax years beginning after 2025, with inflation adjustments possible starting in 2027. For subs you paid $2,000 or more during 2026, a 1099-NEC is generally required.

When are 2026 1099-NECs due?

Form 1099-NEC is due to the subcontractor and to the IRS by January 31. January 31, 2027 is a Sunday, so the due date moves to the next business day, February 1, 2027.

Do I include materials the sub supplied?

Yes, when supplying the parts or materials was incidental to the service. The 1099-NEC instructions include in box 1a payment for services, including payment for parts or materials used to perform the services if supplying them was incidental to providing the service.

What if I paid a sub by credit card or a payment app?

Those payments are reported by the card processor or app on Form 1099-K, not by you on Form 1099-NEC. Only the payments you made by cash, check, ACH or wire count toward your 1099-NEC for that sub.

What if a sub won't give me a W-9?

If a payee fails to provide a correct taxpayer identification number, the payer may be required to backup withhold at 24 percent on nonemployee compensation. Collecting the W-9 before the first payment avoids the problem.

Educational content only. This article is for general informational purposes and does not constitute tax, legal, or financial advice. Tax outcomes depend on your specific facts, circumstances, entity structure, and applicable law. Consult a qualified professional before acting on any information here.

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By Askia Roberts, CPA · GA License #CPA038784 · RTW Advisors

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