For payments made in 2026, you generally file Form 1099-NEC for each unincorporated contractor you paid $2,000 or more for services, up from $600 before. In QuickBooks Online, mark contractors as 1099-eligible, map the accounts you pay them from, then run Prepare 1099s. Forms for 2026 payments are due to contractors and the IRS by February 1, 2027, because January 31 falls on a Sunday.
What changed for 2026
For years the 1099-NEC threshold was $600. Under the tax law passed in July 2025, it rises to $2,000 for payments made after December 31, 2025, and is set to adjust for inflation starting in 2027. The $600 threshold still applied to 2025 payments, filed in early 2026.
A higher threshold does not change what income is taxable, and it does not mean you can stop tracking contractors. You still need their details on file, and your CPA may still want records of smaller payments.
Who needs a 1099-NEC
As a general rule, you file a 1099-NEC for a person or unincorporated business you paid for services in the course of your business, when the year's total meets the threshold. A few common exceptions:
- Corporations generally do not get a 1099-NEC. The main exception is payments to attorneys.
- Payments by credit card or through apps like PayPal are generally reported by the payment company on Form 1099-K, so you leave them off your 1099-NEC.
- Employees get a W-2 through payroll, never a 1099.
Whether someone should be a contractor at all is a separate question, and in California it is a strict one. If you are unsure, ask your CPA or employment attorney.
What to collect now, not in January
- A Form W-9 from every contractor before you pay them. It gives you their legal name, tax classification and taxpayer ID. Chasing W-9s in January is where most 1099 delays come from.
- How you paid them. Check, ACH and bank transfer count toward the 1099-NEC. Card and payment-app payments usually do not.
- California's contractor report. Separately from the 1099, California asks businesses to report independent contractors who are individuals to the EDD on Form DE 542, within 20 days of paying or contracting for $600 or more in a year. That threshold did not change with the federal one.
The steps in QuickBooks Online
Menu names shift from time to time, but the flow has stayed the same.
- Set up each contractor. Go to Expenses & Bills, then Contractors (it can also appear under Payroll). Open the contractor, confirm their name, address and tax ID from the W-9, and make sure they are marked to track payments for 1099.
- Start Prepare 1099s. Check that your own company name, address and tax ID match what is on your IRS notices.
- Map your accounts. Choose the expense accounts you pay contractors from, such as Contract labor or Professional fees, and assign them to the 1099-NEC box for nonemployee compensation.
- Review the contractor totals. QuickBooks lists each contractor with the amount it plans to report. Card payments should be excluded automatically. Compare the totals to what you expect.
- File. You can e-file through QuickBooks, which sends copies to contractors, or print and file yourself. Check whether state filing is included for your situation.
Where 1099 totals usually go wrong
- A contractor paid from the wrong account, so the payments never show up in the 1099 totals.
- Reimbursed expenses lumped in with fees, which can overstate what you report. Ask your CPA how they want reimbursements handled.
- The same person set up twice, once as a vendor and once as a contractor, splitting their total in two.
- Card payments recorded as bank payments, pulling them into the 1099-NEC by mistake.
An hour spent in October checking contractor setup and account mapping saves a lot more than an hour in late January.
Common questions
What is the 1099-NEC threshold for 2026?
For payments made after December 31, 2025, the federal threshold for Form 1099-NEC is $2,000, up from $600. It is scheduled to be adjusted for inflation starting in 2027.
When are 1099-NEC forms for 2026 payments due?
The deadline is January 31, moved to the next business day when it falls on a weekend. For 2026 payments that means February 1, 2027, for both the contractor copy and the IRS filing.
Do I send a 1099-NEC if I paid a contractor by credit card?
Generally no. Card and payment-app payments are reported by the payment company on Form 1099-K, so they are left off your 1099-NEC.
Want someone to look at yours?
We keep contractor payments and W-9s tracked all year and have the 1099-NEC information ready well before the deadline. A free Books Checkup will show whether your contractor setup is right today.
Get a free Books CheckupThis guide is general information about bookkeeping, not tax or legal advice. Rules change, so check the details with your CPA before you act on them.