For payments made in 2026, the threshold for filing most Forms 1099-NEC and 1099-MISC jumped from $600 to $2,000, and the forms due January 31, 2027 are the first ones filed under the new rule. From keeping the books for contractors, we've found that January is when the 1099 problems surface, usually as a stack of subcontractors with no W-9 on file and a vendor list in QuickBooks that nobody has looked at since the spring.
The higher threshold means fewer forms for most contractors, which is good news. What it doesn't change is the work that makes 1099 season painful, because you still need to know who you paid, how you paid them, and whether you have their information on file. This post covers what changed, what stayed the same, and what to do in November and December so January is a reporting exercise instead of a scavenger hunt.
What changed for 2026 payments
The One Big Beautiful Bill Act raised the reporting threshold for nonemployee compensation and most other 1099-MISC payments from $600 to $2,000 for payments made after December 31, 2025. If you paid a subcontractor $1,500 for the year in 2026, you generally no longer file a 1099-NEC for them. If you paid them $2,000 or more, you still do. The threshold is scheduled to be adjusted for inflation in later years, so it's worth checking the current figure each January rather than assuming it stays put.
A few payment types didn't move with it. Royalties are still reported at $10, and gross proceeds paid to an attorney that aren't for the attorney's own services are still reported at $600. Those rarely come up for a trade business, but they're a reason to confirm the rules for anything unusual with your tax pro instead of applying $2,000 across the board.
What stayed the same
The January 31 deadline for Form 1099-NEC didn't change, and it applies to both the copy you send the IRS and the copy you send the subcontractor. Payments you made by credit card or through a payment app like PayPal are still left off your 1099-NEC, because the card processor or payment network reports those. Corporations are still generally exempt from receiving a 1099-NEC, with attorneys as the main exception, while sole proprietors and most LLCs still need one once they cross the threshold.
Backup withholding didn't go away either. If a vendor refuses to give you a taxpayer identification number, you're generally required to withhold federal tax from their payments, and a 1099 is required for those payments no matter how small they are. That's the strongest argument for collecting a W-9 before the first check goes out.
A worked example
Picture a remodeling contractor that paid 14 subcontractors during 2026, all by check or ACH. Nine of them were paid more than $2,000 for the year, three were paid between $600 and $2,000, and two were paid less than $600 for small one-off jobs.
Under the old rule, the contractor would file 12 forms. Under the new rule, they file nine. That saves a few forms and a little postage, but the real work is the same, because the contractor still has to total every vendor's payments for the year, separate card payments from check and ACH payments, and confirm a W-9 is on file for the nine subs who need a form. The contractor also can't know in advance which of the three mid-range subs will end up over $2,000 next year, so collecting W-9s from everyone at the start of the relationship is still the only approach that holds up.
Where 1099 season actually breaks down
The threshold was never the hard part. The hard part is bookkeeping that wasn't set up to answer the questions 1099 filing asks.
The most common problem is subcontractors paid under different vendor names. A sub gets paid as "Mike's Drywall" in March, "Mike Torres" in June, and "MT Drywall LLC" in October, and the three records add up to $6,000 while no single one crosses the threshold. The second is subs paid from the owner's personal account or a personal card, which never make it into the books at all until someone asks. The third is mixing card and check payments to the same vendor without separating them, which leads to over-reporting on the 1099 and confusion for the sub when their own numbers don't match yours.
These are the same issues that make job costing unreliable, since a subcontractor cost that isn't tied to the right vendor usually isn't tied to the right job either. Our guide on how to set up job costing in QuickBooks Online covers the vendor and account setup that solves both problems at once.
What to do in November and December
Run a vendor spending report for the year in QuickBooks now, while there's still time to chase paperwork. Sort it by total paid, and merge any duplicate vendor records so each subcontractor shows up once with one total.
Next, mark every subcontractor as a 1099 vendor in QuickBooks and confirm the accounts you pay them from are mapped to nonemployee compensation. If your chart of accounts has one clean subcontractor account in cost of goods sold, this step takes minutes. If subs are scattered across "contract labor," "outside services," and "miscellaneous," it takes a lot longer, which is one reason we keep subcontractors in a single account in every construction chart of accounts we build.
Then request a W-9 from every sub who doesn't have one on file, including the ones under $2,000, because they may cross the line next year and they're easier to reach now than in late January. While you're asking, request a current certificate of insurance or a workers' comp exemption too. In Florida, an injured worker on an uninsured sub's crew can become your workers' comp problem, so the insurance paperwork matters as much as the tax paperwork.
Florida contractors should pay extra attention to anyone brought in during hurricane season. Storm work tends to pull in temporary crews fast, often paid quickly and documented loosely, and those are the vendors most likely to be missing a W-9 when January arrives.
A word on classification
A higher filing threshold doesn't change who counts as a subcontractor. If someone works only for you, uses your tools, and works the hours you set, the IRS may see an employee no matter what form you file, and the cost of getting that wrong is back payroll taxes, not a late 1099. The IRS explains the factors it looks at on its independent contractor or employee page, and it's worth a conversation with your tax pro if any of your regular subs look more like crew members.
When it's time for help
For contractors under a few hundred thousand in revenue with a handful of subs, a clean vendor list and a calendar reminder may be all 1099 season needs. Once a home service or construction business passes about $500,000 in revenue, the sub list usually gets long enough that missing W-9s, duplicate vendors, and card payments start costing real time every January, and that's when it pays to have the books set up so the 1099 totals are simply right.
For the broader picture of what contractor books should track all year, see Bookkeeping for Contractors, and for the year-end side of taxes, our construction tax deductions checklist covers what to gather before you meet with your tax pro. This post is educational, and the specifics of your filing should be confirmed with your tax pro.
At Prophet Accounting, we work with contractors and other home service trades across Port St. Lucie, the Treasure Coast, and nationwide. We keep vendor records clean, collect and track W-9s through the year, and set up subcontractor accounts so your 1099 totals are ready when January comes. Schedule a consultation at prophetaccounting.com/contractors or give us a call at (772) 380-2871. For a quick read on monthly bookkeeping costs, our pricing calculator gives you a ballpark in about two minutes.
