Use Form 1099-NEC for payments to independent contractors and freelancers for services performed in 2026. Use Form 1099-MISC for everything else — rent, royalties, other income, and medical payments. That's the short version. Here's the detailed breakdown every self-employed worker and small business needs to get right before January 31, 2027.
A quick history lesson
Before 2020, all miscellaneous income — including non-employee compensation — was reported on a single Form 1099-MISC. The IRS split things up starting in 2020 to create Form 1099-NEC specifically for non-employee compensation (hence the "NEC" designation). The reason? Non-employee compensation was the largest category of 1099 reporting, and the IRS wanted a dedicated form to reduce processing errors and improve tracking of gig economy income.
The split was mandatory starting with the 2020 tax year. Today, Form 1099-NEC handles all service-related payments, and Form 1099-MISC handles everything else. This distinction matters more than ever because the penalties for incorrect or late filing increase each year.
Form 1099-NEC: what it's for
Form 1099-NEC is the form you use when you pay $600 or more in a year to a non-employee for services. Common scenarios:
- Paying a freelance designer $2,500 for a branding project
- Hiring an independent IT consultant for $3,000
- Contracting a virtual assistant for $7,200 over the year
- Paying a podcast host $1,500 for producing episodes
- Engaging a marketing agency (sole proprietor or LLC taxed as sole prop) for $12,000
Who gets a 1099-NEC?
The IRS requires you to issue a 1099-NEC to any person or unincorporated business (sole proprietor, LLC with single member taxed as sole prop) who receives $600+ in compensation for services during the year. Incorporated businesses (C-corps and S-corps) do NOT get 1099s — the IRS doesn't require 1099 reporting for payments made to incorporated entities.
1099-NEC filing deadlines for 2026
The deadlines are the same whether you're sending to the recipient or the IRS:
| Action | Deadline |
|---|---|
| Send Copy B to recipient | January 31, 2027 |
| File Copy 1 with IRS (paper) | January 31, 2027 |
| File Copy 1 with IRS (electronic) | January 31, 2027 |
Yes — the recipient copy and the IRS copy are due on the same date. There's no extended window for the IRS copy like there used to be with the old 1099-MISC rules. This catches many small businesses off guard.
Form 1099-MISC: what it's for now
Form 1099-MISC is now the catch-all form for income types that aren't non-employee compensation. The most common uses in 2026:
| Box | What to Report | Filing Threshold |
|---|---|---|
| Box 1 (Rents) | Payments for real estate rentals, equipment rentals | $600 |
| Box 2 (Royalties) | Royalty payments for intellectual property, patents, etc. | $10 |
| Box 3 (Other income) | Awards, prizes, healthcare payments, etc. | $600 |
| Box 5 (Fishing boat proceeds) | Fishing crew payments | Any amount |
| Box 6 (Medical and health care) | Payments to physicians, hospitals, etc. | $600 |
| Box 7 (Crop insurance proceeds) | Crop insurance payments | $600 |
| Box 9 (Direct sales) | Direct sales of $5,000 or more | $5,000 |
1099-MISC deadlines for 2026
When the 1099-MISC has only entries in Box 7 (crop insurance) or Box 9 (direct sales), the deadline for the IRS copy is extended to March 31, 2027 (if filing electronically) or February 28, 2027 (if filing on paper). But if your 1099-MISC includes payments in Box 1, 3, 5, or 6, the January 31 deadline applies across the board.
Side-by-side comparison: 1099-NEC vs 1099-MISC (2026)
| Feature | Form 1099-NEC | Form 1099-MISC |
|---|---|---|
| Purpose | Non-employee compensation for services | Rents, royalties, other income |
| Threshold | $600+ per recipient per year | $10+ (royalties), $600+ (other boxes) |
| Recipient Deadline | Jan 31, 2027 | Jan 31, 2027 |
| IRS Deadline | Jan 31, 2027 (all methods) | Jan 31, 2027 (most boxes); Mar 31 (Box 7/9 e-file) |
| Who Must Issue | Any trade or business paying $600+ for services | Any trade or business paying reportable income |
| Corporations Exempt? | Yes (C-corps and S-corps don't get 1099-NEC) | No exception for corps in most boxes |
| Penalty for Late/Incorrect | $50-$280 per form (increases based on lateness) | $50-$280 per form (same penalty structure) |
Common mistakes to avoid in 2026
Mistake 1: Using 1099-MISC for non-employee compensation
This is the most common error. Since 2020, non-employee compensation must go on Form 1099-NEC. If you reported service payments in Box 7 of a 1099-MISC in prior years, you had a grace period — but that ended in 2022. The IRS now requires NEC on the dedicated form.
Mistake 2: Forgetting the $600 threshold (or misunderstanding it)
The $600 threshold is per recipient, per tax year, per type of payment. If you pay a freelancer $350 in January and $350 in March, that's $700 total — you must issue a 1099-NEC. But if you pay two different freelancers $400 each, neither crosses the threshold individually.
Mistake 3: Not sending 1099s to freelancers who are S-corps or C-corps
This is not a mistake — it's correct. The IRS does not require 1099-NEC or 1099-MISC reporting for payments to incorporated entities (C-corporations or S-corporations). The IRS tracks corporate income through corporate tax returns, not 1099s. Only sole proprietors, single-member LLCs, and partnerships need 1099s.
Mistake 4: Missing the January 31 dual deadline
Many businesses still think they have until February 28 to file with the IRS. That was true for the old 1099-MISC rules. Now both the recipient copy and the IRS copy are due January 31. Filing even one day late triggers a $50 penalty per form, and the penalty escalates to $280 per form if you're 30+ days late.
Mistake 5: Not keeping copies for your records
Keep Copy C of every 1099 you issue for at least three years from the filing date. The IRS can audit your 1099 reporting for up to three years after the return was due. Digital copies are acceptable if stored securely and retrievable.
What to do if you receive a 1099-NEC or 1099-MISC
As a self-employed worker, you should receive Copy B of Form 1099-NEC or 1099-MISC from each client who paid you $600+ during the year. These forms report your income to the IRS. What to do when you receive them:
- Verify the numbers — check that the reported amount matches your records (invoices, bank deposits, contracts)
- Report discrepancies — if there's an error, ask the client to issue a corrected 1099 (Form 1099-NEC with a "CORRECTED" box checked)
- Keep all copies — file received 1099s with your tax records for at least three years
- Cross-reference — the IRS compares all 1099s received against your reported income. If there's a mismatch, you'll get an IRS notice (CP2000) proposing additional tax
Frequently Asked Questions
Do I need to issue a 1099-NEC for payments under $600?
No. The IRS only requires 1099-NEC reporting when you pay $600 or more to a single recipient for services in a calendar year. Payments under $600 don't trigger a filing requirement, though the recipient still must report the income on their own tax return.
Can I issue a 1099-NEC for payments to an LLC?
It depends on how the LLC is taxed. Single-member LLCs taxed as sole proprietorships require a 1099-NEC if paid $600+. Multi-member LLCs taxed as partnerships also require 1099s. However, LLCs taxed as S-corporations or C-corporations do NOT require 1099 reporting.
What if I miss the January 31 deadline?
Penalties start at $50 per form if filed within 30 days of the deadline, increase to $110 per form if filed after 30 days but before August 1, and jump to $280 per form if you fail to file by August 1. The IRS can also impose penalties for intentional disregard of the filing requirements.
Should I file 1099s electronically or by mail?
Electronic filing is strongly recommended. The IRS processes electronic filings faster, and you get confirmation of receipt. The IRS requires electronic filing if you're submitting 250+ forms, but it's voluntary (and free) for smaller filers using the IRS FIRE system or authorized e-file providers.
IRS sources and further reading
For complete instructions, refer to the Instructions for Forms 1099, 1098, 5498, and WG-2 (IRS Publication 1220), updated annually. The IRS also maintains a dedicated page for each form with fillable PDFs and e-file enrollment information at irs.gov.
Final checklist for 2026
Before January 31, 2027, make sure you:
- Compile all payments to non-employee service providers totaling $600+
- Verify each recipient's Tax ID (SSN or EIN) using Form W-9
- Prepare Form 1099-NEC for service payments, Form 1099-MISC for other income types
- Send Copy B to each recipient by January 31, 2027
- File Copy 1 with the IRS by the same date
- Keep Copy C for your records
Use the Tax Deduction Finder alongside the Self-Employment Tax Calculator to see how your 1099 income flows into your full 2026 tax picture.