Most of what you will read about 1099s quotes a $600 threshold. For payments you make during 2026, that number is wrong.
The IRS instructions for Forms 1099-MISC and 1099-NEC, revised December 2026, put it plainly: for tax years beginning after 2025, the minimum threshold for reporting these payments rose to $2,000, and it may be adjusted for inflation starting in calendar year 2027. So the forms you file in early 2027, covering what you paid during 2026, run on the higher number. The forms you filed in January of this year, covering 2025, ran on the old one.
That single change takes a meaningful share of small vendors off the list. It does not simplify the decision, because the threshold was never the hard part.
The four conditions, all of which have to hold
A payment lands on a Form 1099-NEC when every one of these is true.
- You made it in the course of your trade or business, not personally. A founder paying a plumber to fix a sink at home reports nothing.
- The recipient is not your employee. Wages, bonuses, and awards paid to employees belong on a W-2, whatever the amount.
- The total for that payee across the calendar year reached $2,000 or more.
- You paid by check, ACH, cash, or bank transfer rather than by card or payment app.
The fourth one is the condition founders miss, and it is worth its own section below.
Two amounts sit outside the new threshold and stay where they were. Gross proceeds paid to an attorney, the settlement money that passes through a law firm rather than paying for the firm's own services, are reportable in box 10 of the 1099-MISC at $600 or more. Cash payments for fish purchased for resale keep a $600 floor too, which will not come up for most readers but explains why a blanket "everything is $2,000 now" is not quite right.
The vendors you leave off, and the ones you cannot
Payments to a corporation are generally not reportable. That includes an LLC that has elected to be treated as a C corporation or an S corporation. It is the reason the list of vendors you paid is much longer than the list of vendors who get a form.
The exceptions to that exemption are where companies get it wrong, because they feel like they should follow the corporation rule and they do not:
- Attorneys' fees, reportable in box 1a of the 1099-NEC at $2,000 or more, even when the firm is a corporation
- Gross proceeds paid to an attorney, box 10 of the 1099-MISC, at $600 or more
- Medical and health care payments, box 6 of the 1099-MISC, at $2,000 or more, including payments to an incorporated practice
- Substitute payments in lieu of dividends or tax-exempt interest, and cash payments for fish purchased for resale
Also off the list entirely: payments for merchandise, freight, storage, and similar goods; rent paid to a real estate agent or property manager, though the agent then reports the rent it passes to the owner; and payments to a tax-exempt organization or a government body.
Paying through a card or an app moves the reporting to somebody else
Payments made with a credit card or payment card, and third-party network transactions, are reported on Form 1099-K by the payment settlement entity under section 6050W. They are not reportable by you on a 1099-MISC or 1099-NEC.
Read that against how a startup actually pays people. A contractor invoiced for $9,000 over the year. Half of it went out on the corporate card, half by ACH from the operating account. Only the ACH half is yours to report, and if that half came to $1,400 there is no form at all, even though you paid the person $9,000.
The mistake runs in both directions. Companies that ignore the rule file forms that duplicate a 1099-K the contractor already received, which puts twice the income in front of the IRS under one name. Companies that apply it too broadly assume anything that touched a fintech account is covered, when a plain ACH out of a bank account is not a third-party network transaction at all.
Settling this needs the payment method attached to the payment, which is a bookkeeping question rather than a January question. If your ledger records the vendor and the amount but not which account the money left, the split cannot be reconstructed without going back through statements.
NEC or MISC, and which box
Nonemployee compensation, which is services performed by someone who is not your employee, goes in box 1a of Form 1099-NEC. Contractors, consultants, freelance designers, directors' fees, and commissions all sit here.
Form 1099-MISC carries the rest of what a small company is likely to pay: rents in box 1, other income in box 3, medical and health care payments in box 6, and gross proceeds paid to an attorney in box 10. Rent paid directly to a landlord for office space is a 1099-MISC item, and it is the one non-contractor payment most startups actually have.
The forms have different deadlines, which matters more than the box choice. The 1099-NEC is due to the recipient and to the IRS on the same date in January. The 1099-MISC is due to the recipient in January but to the IRS at the end of February on paper, or the end of March electronically. Our 2026 tax calendar has the dates, including the ones that shift because January 31 falls on a weekend.
The W-9 got more important, not less
A higher threshold tempts you to collect fewer W-9s. It should do the opposite, because the threshold is the only part of this decision you can compute from your own records.
Nothing else can be. You cannot tell from a vendor's name whether it is a sole proprietorship, a partnership, an LLC taxed as a partnership, or an LLC that elected S corporation treatment, and the last of those is exempt while the first three are not. Two consultants can trade under names that read identically and sit on opposite sides of the rule. The W-9 is where the payee tells you, in their own hand, which one they are, along with the TIN you need to file at all.
The practical version of this is a rule about sequence. The W-9 is collected before the first payment, not after the year ends. A vendor who has been paid has no reason to hurry, and a vendor you stopped using in March has no reason to answer at all. Requesting it as part of onboarding costs nothing; requesting it in January costs a week of chasing and sometimes ends in backup withholding on a payment you already made.
What the QuickBooks 1099 report will and will not tell you
Accounting software will produce a 1099 summary, and it is a starting point rather than an answer. Three things decide whether the report is right, and all three are set up long before you run it.
The vendor has to be flagged as eligible for 1099 tracking. That flag is manual, it defaults off, and nothing about the payment itself sets it. A contractor added in a hurry mid-year with the box unchecked will be missing from the report with no error anywhere.
The expense accounts have to be mapped to boxes. The report works by looking at which accounts a vendor's payments hit and which box each account is assigned to. Pay a contractor out of a general account that was never mapped and the amount does not appear, even when the vendor flag is on. This is one of the quieter arguments for a chart of accounts where contractor spend lives in accounts of its own rather than inside a catch-all.
Card and payment-app transactions have to be excluded. Software will usually apply the 6050W rule if it can see the payment method, and it cannot see one for a manually entered bill paid outside the system.
So the report answers "what do my current settings produce," and the review question is different: which vendors did I pay $2,000 or more this year, and does each one have a documented reason to be on the list or off it.
The work that belongs in the next three months
Very little of this is January work. The parts that are cheap now and expensive later:
- Every active vendor has a W-9 on file, and every new one gets asked before the first payment goes out
- Vendor records carry the tax classification from the W-9 rather than a guess from the name
- The 1099 flag is set as vendors are created instead of audited in bulk at year-end
- Contractor and professional services spend sits in accounts that map cleanly to a box
- Payment method is visible on the payment, so the card and ACH split can be separated without opening statements
A company whose books are categorized as transactions post is already most of the way there, because the vendor list is current and the coding is settled month by month. A company that catches up in the spring is reconstructing a year of vendor relationships from bank descriptors at the same time as it is trying to file.
The threshold change is genuinely good news for the smallest payees on your list. What it does not change is that the decision runs on facts about the vendor you can only get from the vendor, and the window to get them without chasing anyone closes at the end of December.