The 1099-NEC Threshold Is Changing in 2026

If you own a business and hire contractors, you've probably heard of the "$600 rule."

For years, businesses that paid a nonemployee contractor $600 or more during the year generally needed to issue a 1099-NEC.

Beginning in 2026, that threshold is increasing to $2,000.

For some business owners, that may mean fewer 1099s to prepare at the end of the year. But while the reporting requirement is changing, good recordkeeping is just as important as ever.

What Is a 1099-NEC?

A 1099-NEC is used to report nonemployee compensation.

In simple terms, that usually means you paid someone who is not your employee to perform work or provide a service for your business.

That could include:

• A cleaner

• A subcontractor

• A repair person

• A musician or band for an event

• A freelancer

• Seasonal or occasional help

If you're paying someone outside of your payroll system, there's a good chance the 1099-NEC rules apply. That's why it's important to collect a W-9 from contractors before you pay them. A W-9 provides the information you'll need if you determine that a 1099-NEC is required at the end of the year. 

What Is Changing in 2026?

Starting in 2026, the reporting threshold will increase from $600 to $2,000.

That means if you pay a contractor less than $2,000 during the year, you may not need to issue a 1099-NEC the way you would have under the previous rules.

However, one important thing is not changing: the income may still be taxable to the person receiving it.

The reporting threshold determines whether your business needs to issue the form. It does not determine whether the contractor owes taxes on that income.

The Best Time to Get a W-9 Is Before You Pay Someone

One of the easiest ways to avoid headaches at the end of the year is to collect a W-9 before paying a contractor.

Not in January.

Not after the project is finished.

Before payment is made.

A W-9 provides the legal name, address, and taxpayer identification number you may need if a 1099-NEC is required.

Once someone has been paid and moved on to their next project, tracking down that information can become much more difficult.

What Should Business Owners Do Now?

The higher threshold may reduce paperwork for some businesses, but it's still important to have a process in place.

A few good habits can make year-end reporting much easier:

• Ask for a W-9 before paying a nonemployee contractor.

• Keep clear records of who you paid and what the payment was for.

• Don't wait until January to figure out who needs a 1099-NEC.

• Ask questions before year-end if you're unsure.

The businesses that have the smoothest tax seasons are usually the ones that stay organized throughout the year.

If your business pays contractors, freelancers, or occasional help, now is a great time to review your process and make sure you have the right systems in place.

There are no dumb questions, and it's much easier to ask now than chase paperwork later.