Form 1099-NEC for startups: who gets one, the $2,000 limit and the Feb 1 due date
A startup files Form 1099-NEC for each person, such as a contractor, freelancer or attorney, it paid $2,000 or more for services in 2026. The limit was $600 through 2025. Give the contractor a copy and file with the IRS by February 1, 2027, because January 31 is a Sunday. Payments to corporations are generally exempt, except legal fees. Collect a Form W-9 before the first payment.
Updated · 5 min read · By the Accountable team
The short version
- For payments made in 2026 the Form 1099-NEC limit is $2,000 per payee, and the IRS may adjust it for inflation starting in 2027.
- The 2026 forms are due to contractors and the IRS on February 1, 2027, and unlike Form 1099-MISC there is no later deadline for electronic filers.
- Payments to C and S corporations are generally not reportable, but attorneys' fees are reportable even when the law firm is a corporation.
- Payments made by credit card or through a payment network such as PayPal are reported by the processor on Form 1099-K, not by you.
- Late forms cost $60, $130 or $340 each for returns due in 2026, and a contractor with no taxpayer ID on file triggers 24% backup withholding.
You file a 1099-NEC for each contractor you paid $2,000 or more in 2026
A startup files Form 1099-NEC for each person it paid at least $2,000 during the year for services performed by someone who is not an employee. The IRS includes parts and materials the contractor supplied in that total. The payments must be made in the course of your business, so personal payments do not count.
The One Big Beautiful Bill Act raised the threshold from $600 to $2,000 for payments made after 2025. The IRS says the amount may be adjusted for inflation beginning in 2027. The limit is per payee for the calendar year, not per invoice, so four $600 invoices to one designer add up to $2,400 and need a form.
You must also file a Form 1099-NEC for any person you backup-withheld federal tax from, whatever the amount.
Corporations, card payments and employees do not get a 1099-NEC
Most of a startup's vendors are not reportable. Check each of these before you build the list.
| Payee | Form 1099-NEC? | Why |
|---|---|---|
| Freelance designer or developer (individual) | Yes, at $2,000 or more | Services by a non-employee |
| Contractor paid through an LLC taxed as a partnership or sole proprietor | Yes, at $2,000 or more | Not taxed as a corporation |
| LLC that elected C or S corporation status | No | Payments to corporations are generally exempt |
| Law firm or solo attorney, even as a corporation | Yes, at $2,000 or more | Legal fees are reportable to corporations |
| Vendor paid by company credit card | No | The card processor reports it on Form 1099-K |
| Freelancer paid through PayPal or another payment network | No | Third-party network payments go on Form 1099-K |
| Employee | No | Reported on Form W-2 |
The W-9 your payee fills out tells you which row applies, because it states whether the payee is an individual, a partnership or a corporation and gives the taxpayer ID you put on the form.
A worked example: five payees, three forms
Freelance designer (individual), paid by ACH: $14,500 across 6 invoices. File a 1099-NEC.
Development agency, an LLC that checked the C corporation box on its W-9: $38,000. No form.
Law firm: $6,200 for a contract review. File a 1099-NEC, because legal fees to a corporation are reportable.
Freelance writer paid through PayPal: $3,000. No form from you; PayPal reports it on Form 1099-K.
Photographer (individual), paid once by ACH: $1,800. No form, because it is under $2,000. The photographer still owes tax on the income.
Three of the five payees stay off the list, and one of them falls off only because of how it was paid. That is why the list comes from the books, by vendor and by payment method, not from memory.
Collect a W-9 before the first payment, not in January
Form W-9 gives you the payee's legal name, tax classification and taxpayer identification number. If a payee does not give you a taxpayer ID in the required way, or the IRS tells you the number is wrong, you must withhold a flat 24% of each payment as backup withholding and send it to the IRS.
Asking for the W-9 in January means chasing contractors who may have moved on. Asking at onboarding, or before the first invoice is paid, means the list is ready when the year ends.
File by February 1, 2027 and pay the penalty only if you are late
Form 1099-NEC is due to the recipient and the IRS by January 31. In 2027 that date is a Sunday, so the due date is Monday, February 1. Unlike Form 1099-MISC, it has no later deadline for electronic filers.
The IRS charges a penalty for each late or incorrect form: $60 if filed up to 30 days late, $130 from day 31 through August 1, $340 after August 1 or if never filed, and $680 for intentional disregard. Those are the amounts for returns due in 2026; the IRS adjusts them yearly, so check the table for 2027.
A company that files 10 or more returns of any type in a year, counting payroll and information returns together, must file them electronically. The IRS runs a free online portal for this called IRIS. Some states want their own copy, so check the states where your contractors work.
A five-step routine keeps the filing to an afternoon
Step 1: Ask every new contractor for a Form W-9 before you pay them.
Step 2: Tag payments to contractors and attorneys in your books as they happen, and record how each was paid (ACH, check, card).
Step 3: In the first week of January, total 2026 payments by vendor and list every individual, partnership and law firm at $2,000 or more.
Step 4: Check each name and taxpayer ID against its W-9, then file the forms electronically.
Step 5: Send each contractor their copy by February 1, 2027, and keep the W-9 and the filing confirmation with the year's records.
Accountable's Tax › 1099s tab prepares 1099-NEC and 1099-MISC filings from your books. Press Request W-9s to collect vendors' details, then Export › Files for IRIS. It shows for US companies only.
Questions founders ask
What is the 1099-NEC threshold for 2026?
$2,000. The IRS instructions say to file Form 1099-NEC for each person you paid at least $2,000 for services during the year. It was $600 through 2025, and the IRS may adjust it for inflation beginning in 2027. Attorneys' gross proceeds reported in Form 1099-MISC box 10 stayed at $600.
When is Form 1099-NEC due?
To the contractor and the IRS by January 31. For 2026 payments that falls on a Sunday, so the due date is Monday, February 1, 2027.
Do I send a 1099-NEC to an LLC?
It depends on how the LLC is taxed. A single-member LLC or partnership gets one. An LLC that elected to be taxed as a C or S corporation generally does not, except for legal fees. The W-9 tells you which it is.
What if I paid a contractor with a credit card?
You do not report it. Payments made with a credit or payment card, and third-party network transactions such as PayPal, are reported by the payment processor on Form 1099-K.
What is the penalty for not filing a 1099-NEC?
For returns due in 2026 it is $60 per form if filed up to 30 days late, $130 through August 1, and $340 after that or if never filed, plus interest. Intentional disregard is $680 per form with no maximum.
Your 1099 list comes from the books, with W-9s already requested
Accountable's Tax › 1099s tab lists the vendors who need a form, requests their W-9s, and exports the files for the IRS's IRIS portal.
Start freeSources, checked September 30, 2026: