Paying contractors: W-9s, 1099s, and the new $2,000 threshold

Collect a W-9 before you pay anyone. Then file 1099s by January 31. Here's what changed for 2026.

Startups lean on contractors: designers, developers, that one marketing person. Paying them is easy. The paperwork at year-end is where things go sideways.

Step 1: get a W-9 before you pay

Before you send the first payment, ask the contractor for a Form W-9. It gives you their legal name, tax classification, and taxpayer ID. Chasing W-9s in January from someone you worked with in March is miserable. Get it up front.

Step 2: file 1099-NEC forms by January 31

If you pay a contractor above the reporting threshold during the year, you file a Form 1099-NEC with the IRS and send a copy to the contractor. Both are due January 31.

What changed: $600 is now $2,000

For years the threshold was $600. The 2025 tax law raised it to $2,000 for payments made in 2026 and later, and it will be adjusted for inflation after that. So for work paid in 2026, you generally only file a 1099-NEC for contractors you paid $2,000 or more.

Keep collecting W-9s from everyone anyway. You won’t always know in advance who’ll cross the line.

Who doesn’t need one

Corporations generally don’t get 1099-NECs (with exceptions, like attorneys).
Payments made by credit card or through platforms like PayPal are reported by the payment processor, not by you.

Contractor or employee?

The label you use doesn’t decide it. What matters is the actual relationship. If you set their hours, provide their tools, direct how the work gets done, and they work only for you, the IRS may see an employee. Getting this wrong can mean back payroll taxes and penalties.

The short version

W-9 before the first payment. 1099-NECs by January 31 for anyone paid $2,000 or more in 2026. If you’re a TEO client, we flag contractors in your books throughout the year so January isn’t a scramble.