Every January, freelancers start receiving Form 1099-NEC from their clients, and many wonder what to do with it. Do you need to attach it to your return? What if a client never sends one? And if you hire subcontractors, do you have to file them? This guide answers all of it, including the new $2,000 reporting threshold that applies to payments made in 2026 and later. Here’s what every freelancer should know about the 1099-NEC form in 2026.
Short answer: Form 1099-NEC (“Nonemployee Compensation”) is the form businesses use to report payments to independent contractors. For payments made in 2025, the threshold was $600; for payments made in 2026 and later, it rose to $2,000 under the 2025 federal tax law. You report all your freelance income on Schedule C whether or not you receive a 1099.
Key takeaways
- 1099-NEC reports nonemployee compensation paid in the course of a trade or business.
- Threshold: $600 for 2025 payments (forms filed in early 2026); $2,000 for 2026 payments (forms filed in early 2027), indexed for inflation after that.
- Due to recipients and the IRS by January 31.
- You don’t attach 1099s to your return, but your reported income should match or exceed what’s on them.
- Some states may keep a lower threshold for their own reporting.
What is a 1099-NEC form?
Form 1099-NEC tells the IRS how much a business paid you as an independent contractor during the year. It replaced Box 7 of Form 1099-MISC starting with the 2020 tax year. The client (“payer”) sends one copy to you and one to the IRS. You’ll usually receive it by early February.
| Box | What it shows |
|---|---|
| Payer’s and recipient’s TIN | The client’s EIN and your SSN or EIN |
| Box 1: Nonemployee compensation | Total paid to you for services during the year |
| Box 2 | Checkbox for direct sales of $5,000+ of consumer products for resale |
| Box 4: Federal income tax withheld | Backup withholding, if any (usually blank) |
| Boxes 5–7 | State information |
The new 1099-NEC threshold: $600 vs. $2,000
| Payments made in… | Forms filed in… | Federal 1099-NEC threshold |
|---|---|---|
| 2025 | January 2026 | $600 |
| 2026 | January 2027 | $2,000 |
| 2027 and later | January 2028+ | $2,000, adjusted for inflation |
The higher threshold comes from the One Big Beautiful Bill Act and applies to payments made on or after January 1, 2026. It changes reporting only, not what’s taxable. Some states may keep the $600 threshold for state reporting, so check your state’s rules.
If you receive a 1099-NEC
- Check it against your records. Compare Box 1 with what you actually received from that client during the calendar year.
- Report all your income on Schedule C, including payments from clients who didn’t send a 1099.
- Don’t double-count payments that also appear on a Form 1099-K from a payment platform. Reconcile them using your own records.
- If the amount is wrong, ask the client to issue a corrected form. Don’t simply ignore it, because the IRS matches 1099s against your return.
- Keep it with your tax records. You don’t attach it to your return.
1099 income is subject to self-employment tax, which is why most freelancers make quarterly estimated tax payments. If you’re unsure how contractor income differs from wages, read 1099 vs. W-2.
What if you don’t receive a 1099?
That’s normal, especially now that the threshold is $2,000. Clients who paid you less than the threshold, paid by credit card or through a payment platform, or are individuals (not businesses) generally don’t have to send one. The income is still taxable. Your invoices and bank records are what you report from.
If you pay subcontractors: your filing obligations
If your freelance business pays other contractors (designers, editors, assistants, second shooters), you may need to file 1099-NECs yourself:
- Collect a Form W-9 from every contractor before you pay them.
- Track payments per contractor during the year.
- File a 1099-NEC for each contractor you paid $2,000 or more for services during 2026 (paid by check, ACH or cash).
- Send copies by January 31, 2027 to the contractor and the IRS.
- File electronically if required. The IRS’s free Information Returns Intake System (IRIS) lets small businesses e-file 1099s. Electronic filing is mandatory if you file 10 or more information returns in total.
Payments made by credit card or through payment apps such as PayPal are generally reported by the payment processor on Form 1099-K, not by you on a 1099-NEC.
Backup withholding
If a contractor doesn’t provide a correct taxpayer identification number, the payer may need to withhold 24% of payments as backup withholding and report it in Box 4. That’s another reason to give clients your W-9 promptly and use an EIN instead of your SSN.
1099-NEC vs. 1099-MISC vs. 1099-K
| Form | Used for |
|---|---|
| 1099-NEC | Payments for services by a business to a non-employee |
| 1099-MISC | Rents, prizes, royalties and other miscellaneous income |
| 1099-K | Payments processed through card networks and third-party payment platforms above reporting thresholds |
Frequently asked questions
What is the 1099-NEC threshold for 2026?
For payments made in 2026, businesses generally must file Form 1099-NEC if they pay a contractor $2,000 or more for services. For 2025 payments, the threshold was $600.
Do I have to report income if I don’t get a 1099-NEC?
Yes. All self-employment income is taxable and must be reported on Schedule C, whether or not you receive a form.
When should I receive my 1099-NEC?
Businesses must send Form 1099-NEC to recipients by January 31 of the year after payment. Mailed forms may arrive a few days later.
What if my 1099-NEC is wrong?
Contact the client and ask for a corrected form. Report the correct amount on your return and keep documentation of what you actually received.
Do I need to send 1099s to contractors I paid through PayPal?
Generally no for card or third-party network payments, because the payment processor reports them on Form 1099-K. Payments by check, ACH or cash may require a 1099-NEC if they reach the threshold.
Sources
- IRS: About Form 1099-NEC
- IRS: E-file information returns with IRIS
- Paylocity: 1099 reporting threshold increased to $2,000
Disclaimer: This article is for informational purposes only and is not tax, legal or financial advice. OwnWork HQ is not a CPA or tax advisor. Tax rules change and depend on your situation, so confirm details with the IRS or a qualified tax professional before you act.