Key figures
Federal payables
2026, with sources
- 1099-NEC / 1099-MISC threshold
- $2,000For payments made after Dec 31, 2025, up from $600; may be adjusted for inflation beginning in 2027.
- Backup withholding rate
- 24%When a payee doesn’t give a TIN or the IRS says it’s wrong; the threshold moved to $2,000 with the 1099 threshold.
- Electronic filing requirement
- 10 or more returnsCounting all information returns together — W-2s and 1099s included.
W-9 at onboarding, not in January
Every US vendor that might cross the 1099 threshold should give you a Form W-9 before the first payment: legal name, tax classification and TIN. The IRS’s TIN Matching program, available through e-Services, lets payers check a name and TIN combination before filing.
If a payee won’t provide a TIN, or the IRS tells you the one you have is wrong, you are required to start backup withholding at 24% on reportable payments. The 2025 law raised the backup withholding threshold to $2,000 in step with the 1099 threshold.
1099-NEC and 1099-MISC after the 2025 law
Public Law 119-21 raised the reporting threshold for Forms 1099-NEC and 1099-MISC from $600 to $2,000 for payments made after December 31, 2025, with inflation adjustments possible from 2027. Royalties are still reported from $10.
Form 1099-NEC is due to the contractor and to the IRS by January 31; for 2026 payments that is February 1, 2027, because January 31 falls on a Sunday. Form 1099-MISC is due to recipients by January 31 and to the IRS by February 28 on paper or March 31 electronically. A clean accounts payable vendor file is what turns this from a January project into a report.
- Collect a W-9 from every US vendor before the first payment.
- Mark vendors that are corporations (generally exempt) and attorneys (never exempt).
- Exclude card and payment-app payments — the processor reports them on Form 1099-K.
- Total payments per vendor at year end against the $2,000 threshold.
- File and furnish 1099-NEC by Jan 31 (Feb 1, 2027 for 2026 payments).
E-filing: the 10-return rule and IRIS
Since 2024, any business filing 10 or more information returns in a calendar year — W-2s, 1099s and others combined — must file them electronically. A startup with five employees and a handful of contractors is usually over the line.
The IRS is retiring its FIRE system: the last day to file through it is November 19, 2026. Information returns for tax year 2026, filed in 2027, go through the Information Returns Intake System (IRIS): a free web portal for up to 100 returns at a time, or an application-to-application channel for software providers. Most startups never touch either directly because their payroll and AP tools file for them.
Paying people outside the US
Foreign contractors give you Form W-8BEN (individuals) or W-8BEN-E (entities) instead of a W-9. They do not get a 1099. If you make US-source payments subject to withholding — royalties, for example — the general rate is 30% unless a treaty reduces it, and you report them on Form 1042-S and Form 1042 by March 15 of the following year.
Pay for services performed entirely outside the United States is generally foreign-source income and outside this regime. The W-8 is still the document that shows why you didn’t withhold.
Deadlines
- Jan 31Nonemployee compensation of $2,000 or more paid in 2026 — to the contractor and the IRS (Feb 1, 2027 for 2026, as Jan 31 is a Sunday)Form 1099-NEC
- Jan 31Rents, royalties, prizes and other reportable payments — to recipientsForm 1099-MISC
- Feb 28 on paper; Mar 31 if e-filedFiling with the IRSForm 1099-MISC
- Mar 15US-source payments to foreign persons subject to withholding — to the IRS and the recipientForm 1042-S / Form 1042
Payables, state by state
Everything above applies everywhere. Each state then adds its own rules. Choose one to read its payables page.
Common questions
Who gets a 1099-NEC now?
For payments made in 2026, a 1099-NEC is required when you pay a non-corporate contractor $2,000 or more for services in the course of your business — up from $600, under the 2025 law. Payments to corporations are generally exempt, with exceptions such as attorneys’ fees. Payments you make by card or through a payment app are reported by the processor on Form 1099-K, not by you.
What do I collect from a contractor abroad?
Ask for Form W-8BEN (individuals) or W-8BEN-E (entities) instead of a W-9. Pay for services performed entirely outside the US is generally not US-source income, so there is usually nothing to withhold or report on Form 1042-S; US-source payments such as royalties generally carry 30% withholding unless a treaty reduces it.
Do I have to e-file my 1099s?
Yes, if you have 10 or more information returns in total for the year, counting W-2s. For returns filed in 2027, the IRS’s FIRE system is gone; you file through IRIS (free for up to 100 returns at a time through the portal) or let your payroll or AP provider file for you.
Founder guides on this
- PeopleContractor or employee? Classification for startupsContractor or employee depends on control, not the contract. The IRS test, state rules, 1099s, payroll registration and the cost of getting it wrong.
- ComplianceFirst-year compliance calendar for a Delaware C-corpDelaware franchise tax, 1099s, the federal return, payroll filings, state annual reports and sales tax: the deadlines a young C-corp misses most, by month.
- The closeWhy startups should close their books every monthA monthly close turns a bank balance into numbers an investor, an auditor or a 409A firm will accept. What it is, and why it gets expensive to skip.
More of the federal guide
- AccountingFederal accounting for startupsCorporate tax, conformity to federal rules, apportionment and what it does to your books
- ReceivablesFederal receivables for startupsSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayrollFederal payroll for startupsWithholding, unemployment insurance, paid leave, minimum wage and the rules on paydays
- ComplianceFederal compliance for startupsRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryFederal advisory for startupsCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.