The short answer

What it reportsPayments for services performed for a trade or business by people not treated as its employees. Examples: fees to subcontractors or directors and golden parachute payments.
Amounts to report$2,000 or more for tax years beginning after 2025, up from $600, and may be inflation-adjusted from calendar year 2027. Box 2, aggregated direct sales of consumer goods for resale: $5,000 or more
To the recipientJanuary 31
To the IRS, on paperJanuary 31
To the IRS, electronicallyJanuary 31

Who gets one

Each person a business paid at least $2,000 during the year for services, who is not its employee. The instructions say to file it “for each person in the course of your business during the year to whom you have paid at least $2,000 in: Services performed by someone who is not your employee (including parts and materials)”, and for payments to an attorney. Payments to corporations are generally not reported, with one exception that matters: “The exemption from reporting payments made to corporations does not apply to payments for legal services.”

Two IRS pages, two numbersThe Guide to Information Returns is still the 2025 edition and prints “$600 or more”. The figure above is the 2026 rule from this form’s own instructions, which are the later source. If you are filing for 2025, the Guide is the one that applies to you.

If one arrives

Report it on Schedule C as business income. The form is how the payer told the IRS; it is not your bookkeeping, and income below the threshold is still fully taxable.

The form is how a payer tells the IRS what it paid. Its absence is not permission — income you received is reportable whether or not a form covers it, and a threshold decides only who must file, never what you owe.

If you have to send one

You file one for each non-corporate person you paid $2,000 or more for services. Card and platform payments are excluded — the processor reports those on 1099-K.

Electronic filing is required once you file 10 information returns, counting every type together — eight 1099-NECs and four 1099-MISCs is twelve, not eight.

The independent contractor's form

The form's title says nonemployee compensation. The IRS's own pages say who that usually is: Form 1099-NEC reports payments "to persons not treated as employees (for example, independent contractors)" for services performed for a business. The IRS's general rule for who counts as one: "an individual is an independent contractor if the person for whom the services are performed has the right to control or direct only the result of the work and not what will be done and how it will be done." A contract that calls you a contractor does not settle it. If the relationship is in fact one of employer and employee, it counts as that "regardless of what the relationship is called." The way you are paid does not settle it either: the answer is "not based merely on how the worker is paid, how often the worker is paid, or whether the work is part-time or full-time." How the IRS weighs the evidence goes through the three kinds it looks at.

The consequence takes one line: "If you are an independent contractor, then you are self-employed." The form tells the IRS what the business paid you; the income tax and self-employment tax on it are yours to work out. What a "1099 employee" really is sets a contractor's position beside a W-2 employee's, with the arithmetic.

Is it nonemployee compensation?

The instructions reduce the question to four conditions. If all of them are met, the payment generally goes in box 1a:

  1. "You made the payment to someone who is not your employee."
  2. "You made the payment for services in the course of your trade or business (including government agencies and nonprofit organizations)."
  3. "You made the payment to an individual, partnership, estate, or, in some cases, a corporation."
  4. "You made payments to the payee of at least $2,000 during the year."

The second condition is the one people forget. A payment you make as a private person, to the plumber at home or the painter of your house, is not made in the course of a business and is not reported. The same painter hired for your office is. Who you should not send a 1099 to goes through the cases that trip people up. Whether someone is an employee rather than a contractor is a separate question, with its own tests: see contractor or employee.

What goes in box 1a, and what does not

In box 1a Not on Form 1099-NEC
Fees, commissions, and prizes and awards for services as a nonemployee Payments to a corporation, except for legal services
Parts and materials, when supplying them was incidental to the service Payments for merchandise, freight, storage, telephone and similar items
Fees one professional pays another, such as referral fees Rent paid to a real estate agent or property manager
A fee plus travel reimbursement the contractor did not account for, if together at least $2,000 An employee's wages, bonuses and allowances, which go on Form W-2
Services exchanged between two businesses, at fair market value Card and payment app payments, which the processor reports on Form 1099-K
Directors' fees Payments to a tax-exempt organization or a government

Rent and royalties paid in the course of a business are reported on Form 1099-MISC, not here. Which of the three forms describes your money sets the three side by side.

The boxes on the 2026 form

Box What it holds
1a Nonemployee compensation, the total
1b Cash tips included in box 1a
1c Treasury Tipped Occupation Code, up to two
1d Qualified overtime compensation included in box 1a
2 A checkbox for direct sales of $5,000 or more of consumer products for resale
3 Excess golden parachute payments
4 Federal income tax withheld under backup withholding
5–7 State information

Boxes 1b and 1d are new for 2026, and both are parts of box 1a, not additions to it. The instructions say each holds an amount "included in box 1a." A reader who adds them to 1a counts the same money twice. See the new boxes on your 1099-NEC.

Box 2 is the one box with no amount in it: a tick that says the payer sold you products to resell. What it means for a direct seller, and where the number comes from instead, is in a tick in box 2 and no number anywhere.

Before you pay: the W-9

Ask for a Form W-9 before the first payment, not in January. A payee who does not give you a taxpayer identification number becomes subject to backup withholding, and you must then file a 1099-NEC for that person "regardless of the amount of the payment," with the tax withheld in box 4. Backup withholding at 24% explains the rate and when it stops. The year you hire a second shooter walks through the paperwork for a first-time payer.

Due January 31, however you file

"Section 6071(c) requires you to file Form 1099-NEC on or before January 31, using either paper or electronic filing procedures." Unlike Form 1099-MISC, filing electronically buys no extra time. When the date falls on a Saturday, Sunday or legal holiday, it moves to the next business day: the deadlines calendar says which dates move this season.

If you received one

Box 1a is business income, reported on Schedule C with the rest of your receipts, including payments that no form covered. If a form is wrong, the payer corrects it: see two 1099s for the same money. And if none arrives, the income is still yours to report: no 1099 arrived.

Common questions

Do I send a 1099-NEC to an LLC?
Only if the LLC is not taxed as a corporation. The exception in the instructions covers payments to "a corporation (including an LLC) that is treated as a C or S corporation." The Form W-9 the LLC gives you states how it is taxed.
I paid a contractor by card or through a payment app. Do I send a 1099-NEC?
No. The instructions: those payments "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." The card processor or the app files, not you.
Does the $2,000 threshold apply to what I paid in 2025?
No. The $2,000 applies "for tax years beginning after 2025." Payments made during 2025 were reported at $600 or more. See $600 or $2,000, and which year each applies to.
Do I include the materials a contractor bought for the job?
Yes, when they were part of the service. The form covers "Services performed by someone who is not your employee (including parts and materials)." A payment for goods alone, with no service, is not reported.
Is everything in box 1a subject to self-employment tax?
Generally. The instructions: "Generally, amounts paid to individuals that are reportable in box 1a are subject to self-employment tax." Payments to individuals that are not go in box 3 of Form 1099-MISC instead.

This page is for educational purposes only and does not constitute tax, legal, or financial advice. It covers United States federal reporting. Consult a qualified tax professional about your situation.

Official sources