Explaining the 1099-NEC (and the New $2,000 Threshold)

By the James Family Tax team

Form 1099-NEC reports payments to independent contractors, freelancers and gig workers who aren’t employees. Starting with payments made in 2026, a business only has to send one if it paid you $2,000 or more during the year, up from $600. After 2026, that amount is adjusted for inflation.

Who Receives a 1099-NEC?

If you’re self-employed and a business paid you for your services, expect a 1099-NEC by January 31. Payments made in 2025 still use the $600 threshold.

1099-NEC vs. 1099-MISC

The 1099-NEC covers nonemployee compensation. The 1099-MISC is still used for other payments such as rents, royalties and prizes, and its general threshold also rises to $2,000 for 2026 payments.

What About Form 1099-K?

If you’re paid through a card processor or a payment app such as PayPal or Venmo, you may receive a 1099-K instead. Payment apps send one only when payments exceed $20,000 and 200 transactions in a year.

Report All Your Income

A 1099 is only a record. All self-employment income is taxable, whether or not you receive a form. Sole proprietors report it on Schedule C; S-corporations and partnerships report it on their own business returns.

If You Pay Contractors

Collect a Form W-9 from every contractor before you pay them, track what you pay through the year, and file 1099-NECs by January 31.

Sources: CPA Practice Advisor: OBBBA changes 1099 thresholds; IRS: 1099-K threshold.

How James Family Tax Can Help

Self-employed or running a small business? We prepare business returns and build year-round tax strategies for sole proprietors, LLCs and S-corporations.

Book an appointment at our San Antonio or Schertz office, or call (210) 864-1788.