1099 threshold 2026: who needs a 1099 under the new $2,000 rule

The 1099 threshold for 2026 is $2,000. For payments you make from January 1, 2026, you send a Form 1099-NEC only to a contractor you paid $2,000 or more during the year, up from $600 before¹. Rent you pay goes on Form 1099-MISC at the same $2,000². Most of the forms for 2026 are due February 1, 2027.

Take a small online candle business. In 2026 it paid eight outside people and companies a total of $38,660. Only three of them get a 1099. Under the old $600 rule, it would have sent four. And one check recorded without a name can drop a contractor below $2,000 in the books, so the 1099 they're owed never goes out.

We build Booke AI, AI bookkeeping software for QuickBooks Online and Xero. The rules below come from the IRS instructions for 2026 forms, checked on November 10, 2026.

What changed for 2026

A 2025 federal law raised the reporting threshold for Forms 1099-NEC and 1099-MISC from $600 to $2,000 for payments made after December 31, 2025³,¹.

From 2027 the amount is adjusted for inflation and rounded to the nearest $100³.

A few amounts stayed where they were. Gross proceeds you pay to an attorney, like a settlement paid through a lawyer, are still reported at $600 on Form 1099-MISC. Royalties, such as payments for using someone's patent or book, stay at $10⁴.

The amount that triggers backup withholding moved to $2,000 as well³. Backup withholding means holding back 24% of a payment when a contractor won't give you their taxpayer ID⁴.

The $2,000 decides whether you file a form. Your contractor still owes tax on what you paid them, with or without one.

Who needs a 1099 for 2026

You send a Form 1099-NEC to a person or business you paid $2,000 or more in 2026 for services to your business, when they aren't your employee². Freelancers, independent contractors and single-member LLCs usually fit.

Sources: IRS instructions for Forms 1099-MISC and 1099-NEC².

Do I need to send a 1099 to an LLC?

It depends on how the LLC is taxed. An LLC taxed as a C or S corporation doesn't get a 1099 for services, except for legal services². A single-member LLC is reported under its owner's name and taxpayer ID⁴. An LLC taxed as a partnership gets a 1099 like any other contractor. The contractor's Form W-9, the IRS form where they give you their name, tax ID and business type, tells you which one you're dealing with⁴.

Why card and PayPal payments don't count

Payments you make by credit card, debit card or through a payment app don't go on your 1099-NEC or 1099-MISC². Any reporting is the card company's or the app's job, on Form 1099-K. A payment app sends a 1099-K only when a seller's payments add up to more than $20,000 across more than 200 transactions in the year⁵. You don't file it.

Who got a 1099 at the candle business

The accountant, paid $1,800, is the form the new threshold removes. The developer and the designer were paid more than the photographer, but by card and PayPal, so the business sends them no 1099.

The check that hides a contractor

The photographer's third check came through the bank feed as "CHECK 1047" with no name on it. Say it was booked to Uncategorized Expense, with no vendor attached. QuickBooks then finds only $1,600 for the photographer instead of $2,400. That's under $2,000, so the photographer doesn't get a 1099 from QuickBooks, though the business owes them one.

QuickBooks Online builds each 1099 from payments tied to a vendor marked for 1099 and booked to the expense categories you mapped to a 1099 box⁶. A payment without the vendor, or in the wrong category, isn't on anyone's 1099. Under the $600 rule, $1,600 would still have produced a form. At $2,000, one unnamed $800 check is enough to lose it.

When 1099s are due in 2027

For 2026 payments, Form 1099-NEC is due to the IRS and to each contractor by February 1, 2027. The legal date is January 31, and when it falls on a weekend the deadline moves to the next business day²,⁴. January 31, 2027 is a Sunday.

Sources: IRS instructions², Pub. 1099⁴.

If you file 10 or more information returns in total (1099s, W-2s and similar forms), you have to file them electronically⁴,⁷. From the 2027 filing season, e-filed 1099s go only through the IRS's IRIS system, and the older FIRE system has shut down⁴. With fewer than 10 forms in total, you can still mail paper ones. The IRIS portal is free, but it needs a Transmitter Control Code, an ID that lets you send forms to the IRS, and the IRS takes up to 45 business days to issue one⁸,⁴. If you file through QuickBooks or Xero, their e-file service sends the forms for you.

What happens if you file late

The penalty for 2026 forms is $60 per form if you file up to 30 days late, $130 by August 1, and $340 after that or if you never file⁹. Ignoring the rule on purpose, which the IRS calls intentional disregard, costs $690 per form. The penalty applies separately to the copy for the IRS and the copy for the contractor⁹. One missed 1099-NEC filed after August 1 can cost $680.

How to file 1099s from QuickBooks Online or Xero

Both systems build the forms from the payments already in your books.

QuickBooks Online

1. Go to All apps, then Expenses & Bills, then 1099s¹⁰.

2. Confirm your company's name, address and tax ID.

3. Map your expense categories to 1099 boxes: contract labor and legal fees to nonemployee compensation (box 1a on the 2026 1099-NEC), rent to 1099-MISC box 1¹⁰.

4. Check the Tracked for 1099 list. If a contractor is missing, look in Not tracked for 1099 and add them¹⁰. If a contractor's total looks low, check that their payments are booked to a category you mapped⁶.

5. Review each reportable total. Payments from a credit card account, or with Debit or PayPal in the check number field, are left out automatically¹¹.

6. E-file, or print and mail. QuickBooks files with the IRS and gives each contractor their copy online or by mail. Fees may apply, and mailed copies cost extra¹⁰.

You can send W-9 requests from the same 1099s page, under Recipients & W-9s¹². Our guide to the QuickBooks chart of accounts shows where contract labor and legal fees sit.

Xero

1. In the Tax menu, select 1099¹³.

2. Mark your contractors as 1099 contacts in the W-9 section, which puts them in one group¹⁴.

3. Set up rules: for each rule, pick the contact group, the accounts you categorized the payments to and the 1099 box¹³.

4. Review the report. Xero leaves out payments from credit card accounts and third-party payments like Stripe, Venmo and PayPal, and applies the $2,000 threshold from tax year 2026¹³.

5. E-file from Xero, use a partner app, or export the forms as a CSV¹⁴.

Get your 1099 numbers right before January

Every number on a 1099 comes from how your bank lines were recorded during the year: which vendor, which category, which account they were paid from. Fixing it in January means going back through twelve months of statements, so check it as you go.

• Get a W-9 from each contractor before you pay them for the first time.

• Mark each contractor for 1099 tracking in QuickBooks, or as a 1099 contact in Xero.

• Give every check and transfer a payee. "CHECK 1047" with no name won't land on anyone's 1099.

• Book contractor work to one contract-labor category, and goods to materials or supplies. Our list of business expense categories shows which is which.

• Pay contractors from the checking account the same way all year, so card and PayPal payments stay easy to spot.

• In December, run QuickBooks' 1099 Transaction Detail report¹⁵, or the 1099 report in Xero, and compare each total with what you actually paid.

The monthly routine in our small business bookkeeping basics keeps these lines current.

Where Booke fits

Booke sorts your bank transactions inside QuickBooks Online or Xero every day. It adds the ones it's sure about to your books and asks you about the rest. A check with no name on it is the kind of line that comes to you with a question, months before your 1099s are due.

Booke automates up to 80% of the manual bank-feed work for $129 a month per business. It works with the bank accounts already connected to your books, so your vendors, categories and 1099 setup stay where they are. See how Booke works in QuickBooks Online or in Xero.

FAQ

What is the minimum to report on a 1099 in 2026?

$2,000 for payments made in 2026, for both Form 1099-NEC and rent on Form 1099-MISC¹. Two exceptions stayed lower: gross proceeds paid to an attorney ($600) and royalties ($10)⁴.

Does the $2,000 threshold apply to 1099s filed in early 2026?

No. Forms filed in early 2026 cover 2025 payments, which still used the $600 threshold¹. The $2,000 threshold applies first to the forms you file in early 2027.

Do I need to send a 1099 for payments made through Zelle?

No IRS rule names Zelle. The exception covers payment cards and payment networks², while Zelle moves money straight from your bank account to theirs, much like a bank transfer. Zelle isn't on QuickBooks' list of automatic exclusions, so QuickBooks counts those payments toward the contractor's total¹¹. If you're unsure, ask your tax preparer before you file.

What is the penalty for not filing a 1099?

For forms due in 2027, $340 per form if you file after August 1 or not at all, charged once for the IRS copy and again for the contractor's copy⁹.

Sources

1. IRS, Am I required to file a Form 1099 or other information return?, reviewed July 10, 2026.

2. IRS, Instructions for Forms 1099-MISC and 1099-NEC (Rev. December 2026), retrieved November 10, 2026.

3. U.S. Congress, Public Law 119-21, sections 70432 and 70433, July 4, 2025.

4. IRS, Publication 1099 (2026), General Instructions for Certain Information Returns, reviewed April 30, 2026.

5. IRS, Understanding your Form 1099-K, reviewed October 28, 2026.

6. Intuit, Troubleshoot missing contractors or wrong amounts on 1099s, updated October 15, 2026.

7. IRS, New electronic filing requirements for Forms W-2, retrieved November 10, 2026.

8. IRS, E-file information returns with IRIS, reviewed October 26, 2026.

9. IRS, Information return penalties, reviewed October 30, 2026.

10. Intuit, Create and file 1099s with QuickBooks Online, updated October 20, 2026.

11. Intuit, Understand which payments are excluded from a 1099-NEC and 1099-MISC, updated August 5, 2026.

12. Intuit, Manage contractor and vendor W-9 invites in QuickBooks, updated October 20, 2026.

13. Xero, Set up and run the 1099 report, retrieved November 10, 2026.

14. Xero, About 1099 in Xero, retrieved November 10, 2026.

15. Intuit, Create 1099 reports, updated October 15, 2026.