For payments made in 2026, a business generally files Form 1099-NEC only for a contractor paid $2,000 or more during the year, up from $600. [Federal Register] Fewer vendors will need a form. The vendors who do will need one that is right the first time, and that work happens in your vendor files before January, not in the last week of filing season.
The higher threshold is not where most businesses get into trouble. The trouble starts with missing W-9s, names that do not match tax ID numbers, and payment totals nobody checked until the deadline. Tax problems are easier to manage before the IRS process controls the timeline. If you want a practical review of your vendor records and reporting exposure, speak with Steve Perry, EA. Call 678-717-9818, email steve@bookstaxesatl.com, or connect on LinkedIn at www.linkedin.com/in/steveperrybtm.
How the IRS Uses Your 1099s
A Form 1099 does two jobs. It tells the IRS what you paid, and it tells the IRS what your vendor should be reporting as income. The IRS compares the name and tax ID number on each form with its own records. When they do not match, the IRS sends the payer a CP2100 or CP2100A notice listing the problem accounts. [IRS]
Those notices are mailed in the fall and again in April, and they relate to forms you already filed. Each one starts a clock. The payer is expected to send the vendor a “B” notice with a new Form W-9 within 15 business days and to begin backup withholding no later than 30 business days after the notice if the vendor does not respond. [IRS]
Errors in this year’s vendor file do not disappear when the forms are filed. They come back as notices months later, asking for work you could have done before January.
A Worked Example
Consider an equipment rental company. Here is its 2026 vendor list in late October:
- A repair technician paid $1,850 for the year. Under the new threshold, no Form 1099-NEC is required for that vendor.
- A sole proprietor who installed equipment and was paid $6,400 by check. The W-9 on file is from 2019 and lists a business name, while the tax ID belongs to the owner personally.
- A law firm organized as a professional corporation and paid $3,500. Payments to corporations are generally exempt, but attorneys’ fees are reportable even when the firm is a corporation. [IRS]
- A designer paid $4,000, all by business credit card. Card payments are reported by the card processor on Form 1099-K, not by the business on Form 1099-NEC.
- A new contractor paid $2,200 who never returned a W-9.
There may be other items depending on the facts and circumstances.
Two of these five vendors need no form. One needs a form that is easy to miss. One has a name and number mismatch that will likely produce a CP2100A next fall. The last one is the most serious. When a vendor has not provided a tax ID number, the payer is generally required to withhold 24% from the payments, and that requirement applies immediately. [IRS] If the withholding was never taken, the payer can be held responsible for the amount that should have been withheld. [IRS]
On $2,200, that is $528 the business may owe from its own funds. Requesting a W-9 now and withholding from further payments until it arrives limits the exposure. In late January, the payments are already made and the choice is gone.
What to Fix Before January
A clean vendor file is like handing in a clean copy before the bell rings. The corrections are simple while there is time and difficult once the deadline arrives. These are the steps that matter most in November and December:
- Total payments by vendor. The $2,000 threshold applies to the total paid to a vendor during the year, so several small invoices can add up to a reportable amount.
- Separate card and payment app transactions. Payments made by credit card or through a payment network are excluded from your Form 1099-NEC totals.
- Request missing W-9s now. A vendor who has been paid this year and still has no W-9 is the first priority.
- Check names against tax ID numbers. A sole proprietor’s W-9 should show the owner’s name with the matching number, and the business name on the separate line.
- Flag attorneys and confirm entity types. Legal fees remain reportable to corporations, and an LLC’s tax classification determines whether other payments are reportable.
There may be other items depending on the facts and circumstances.
Before assuming your vendor records are settled for the year, consider having Steve Perry, EA evaluate your payee list, W-9 files, and backup withholding exposure. Call 678-717-9818, email steve@bookstaxesatl.com, or connect on LinkedIn at www.linkedin.com/in/steveperrybtm.
Why January Leaves Little Room
Form 1099-NEC is due to the IRS and to recipients by January 31. [IRS] When that date falls on a weekend, the due date moves to the next business day. For forms covering 2026 payments, January 31, 2027 falls on a Sunday, so the deadline is Monday, February 1, 2027.
There is little flexibility built in. No automatic filing extension is available for Form 1099-NEC, and more time to furnish recipient copies requires a separate request that must be approved. [IRS] A business that starts chasing W-9s in mid January is asking vendors to respond during their own busiest month.
Keep the W-9s you collect. The IRS recommends keeping them for at least four years for future questions. [IRS] If a notice arrives about a vendor three years from now, the signed form in your file is what shows you followed the rules.
If CP2100 notices, missing W-9s, or uncertain vendor records are starting to create concern, speak with Steve Perry, EA before the problem becomes harder to control. Call 678-717-9818, email steve@bookstaxesatl.com, or connect on LinkedIn at www.linkedin.com/in/steveperrybtm.
The Bottom Line
The $2,000 threshold reduces the number of forms. It does not reduce the importance of the records behind them. IRS risk management continues throughout the year, and vendor files are part of it.
Many IRS issues do not come from filing mistakes alone. They come from what taxpayers fail to do after a vendor is paid without a W-9, after a CP2100 notice arrives and sits in a drawer, or after a cleanup opportunity in the fall is pushed into January.
Good tax outcomes come from managing the year before the IRS forces the issue. To review your vendor files while your options are still open, speak with Steve Perry, EA. Call 678-717-9818, email steve@bookstaxesatl.com, or connect on LinkedIn at www.linkedin.com/in/steveperrybtm.
Frequently Asked Questions
Does the $2,000 threshold apply to all 2026 payments?
Yes. It applies to payments made after December 31, 2025, and may be adjusted for inflation beginning in 2027.
If a vendor was paid less than $2,000, do I still need a W-9?
Collecting a W-9 before the first payment is still the best practice. You may not know at the start of the year whether a vendor will cross the threshold.
Do I issue a Form 1099-NEC for vendors I paid by credit card?
No. Card and payment network transactions are reported by the payment processor on Form 1099-K.
What should I do if I receive a CP2100 or CP2100A notice?
Compare the listed accounts with your records. If they match, send the vendor a “B” notice and a new Form W-9 within the required time, and begin backup withholding if the vendor does not respond.
Can I get more time to send Forms 1099-NEC to vendors?
Not automatically. A separate request is required, and approval is not guaranteed.
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