Hired Contractors This Year? How to Issue and File a 1099-NEC

Say you own a business. It might be a photo studio, a restaurant, or a construction company. You can't do everything yourself, so over the past year you brought in help: an actor for a shoot, a photographer for your menu, a plumber for a burst pipe, a part-time cleaner for the job sites. Each one sent an invoice and you paid it.

Now the year is ending, and you've heard you're supposed to issue them a 1099 and file it with the IRS. What should you do? This guide walks through it step by step: who gets a form, what goes on it, how to file it, and how to make sure each person actually receives it. (If you're on the receiving end, see our guide to 1099 filing errors for freelancers instead.)

Who Do You Need to Issue a 1099-NEC To?

A Form 1099-NEC — the "non-employee compensation" form that reports what a business paid an independent contractor for services — is required when you pay someone for services in the course of your business. For 2026, the test has four parts. You generally need to issue one when you paid someone:

1. $2,000 or more during 2026 (the threshold was $600 through 2025), or any amount if you withheld federal income tax from them under backup withholding rules;
2. for services, including parts or materials that are incidental to the work, not for standalone purchases of goods or merchandise;
3. in the course of your trade or business, not for personal reasons; and
4. who is not your employee and, in most cases, is not a corporation.

Here's how that plays out for the people in our example:

The same rules apply if you're a freelancer or solopreneur who hires a designer, editor, or virtual assistant. Being self-employed doesn't exempt you from issuing forms to the people you pay. Landlords running a rental as a business may also need to issue forms. Ask our CPA about your specific situation.

Is your helper a contractor or an employee?

This question matters more than any other, because employees get a W-2 and payroll withholding, not a 1099. Generally, a worker is a contractor when they control how and when the work gets done, use their own tools, and offer their services to other customers. Calling someone a contractor doesn't make them one, and misclassifying an employee can mean back taxes and penalties. If a worker is a gray area, talk to our CPA before year-end.

Where Should You Start? Find Your Situation

The steps are the same for everyone, but the first move depends on the kind of business you run.

Never collected a W-9? You're not out of luck. Ask each contractor for one in writing today, and keep a record of the request. It's much easier to get it now than in late January.

Which Payments Don't Go on a 1099-NEC?

Getting the total right is half of issuing a correct form. Leave these out of a contractor's 1099-NEC total:

• Payments by credit or debit card, or through a third-party payment network. The card processor or network reports these on a Form 1099-K, so you don't report them again on a 1099-NEC. This covers card payments and goods-and-services payments sent through a network such as PayPal, Venmo, or Stripe. It does not cover every app transfer: a payment sent as a personal or "friends and family" transfer isn't a card or network payment, so it may still belong on your 1099-NEC total. Check how each payment was made, and ask our CPA if you're unsure.
• Payments to most corporations. If your contractor's Form W-9 shows they're taxed as a C or S corporation, you usually don't issue a 1099-NEC. The big exception is legal fees, which are reported even when paid to a law firm that is a corporation.
• Standalone purchases of merchandise, freight, or storage. The 1099-NEC is for services. Parts or materials a contractor supplies as part of the job, such as a plumber's labor-and-parts invoice, count toward their total.
• Payments to your own employees. Employees get a W-2, not a 1099. If you're unsure which a worker is, talk to our CPA before year-end, because misclassifying an employee as a contractor can be costly.

Count payments in the year you actually paid them, not the year you were invoiced. A December invoice you paid in January belongs on next year's form.

How Do You Issue a 1099-NEC Correctly?

Follow these steps in order:

1. Get a Form W-9 before the first payment. A Form W-9 — the IRS form where a contractor gives you their legal name, tax classification, address, and taxpayer identification number (TIN) — is the single best way to prevent errors. A TIN is the contractor's Social Security number or Employer Identification Number. Make the W-9 part of onboarding, like a signed contract.
2. Track every payment when you make it. Record the date you paid, the amount, the contractor, and what it was for, including cash. A check you hand over in December counts for that year even if it clears in January. Use a separate total for each contractor.
3. Check each contractor's total in December. Confirm who crossed $2,000, remove payments made by card or through a third-party payment network, and confirm the name, address, and TIN on file still match their W-9.
4. Fill out the form. Enter your business's name, address, and TIN, the contractor's details exactly as they appear on the W-9, and the total in Box 1 (Nonemployee compensation). Include fees, commissions, and bonuses. Reimbursed expenses generally count unless you used an accountable plan, so check with our CPA if you reimburse a lot.
5. Report any backup withholding. If a contractor refused to provide a TIN, you may have been required to withhold 24% of their payments. Any amount you withheld goes in Box 4, and if you withheld any, you must file a 1099-NEC for that contractor even when what you paid them totals less than $2,000.
6. File with the IRS and send the contractor their copy by the deadline. For 2026 payments, both are due February 1, 2027, since January 31 falls on a Sunday. You can file with Numeris Ledger, or file yourself through IRS IRIS (see below).
7. Keep your records. Save the W-9, the filed form, your filing confirmation, and proof you sent the contractor's copy.

Where do you file it with the IRS?

The IRS's free Information Returns Intake System (IRIS) portal lets you file 1099-NEC forms online, either by typing them in or by uploading a CSV file. If you file 10 or more information returns of any type in a year, you're generally required to file electronically. If you file on paper, you must use the official red-ink Copy A (a printout won't be accepted) and send it with Form 1096. Some states also require their own filing, sometimes with lower thresholds, so check your state's rules. Prefer not to deal with IRIS or paper forms? File with Numeris Ledger.

How Do You Make Sure Your Contractor Actually Gets It?

Your legal duty is to furnish the form to the contractor, meaning to deliver Copy B to them by the deadline. Penalties apply for failing to furnish it, even if you filed with the IRS on time. These steps protect you:

1. Confirm their address in December. Email the contractor and ask them to verify the mailing address and email on file. Old addresses are the most common reason forms don't arrive.
2. Get valid consent before sending electronically. You can deliver the form by email or a portal only if the contractor has affirmatively consented in a way that shows they can open the file, and you've given them the required disclosures. Without valid consent, send a paper copy by mail or hand it to them in person. Keep a record of the consent.
3. Mail or hand-deliver by the deadline, and keep proof. Use the address on the W-9, keep a copy of what you sent, and consider tracked mail for contractors who are hard to reach.
4. Send a heads-up message. A short note such as "Your 2026 Form 1099-NEC is on its way, total $X" lets the contractor catch a wrong amount early.
5. Follow up on returned mail. If a form comes back, keep the envelope, try the contractor's email and phone, and note your attempts. A documented effort shows good faith.
6. Correct mistakes quickly. If the amount, name, or TIN is wrong, file a corrected form with the IRS and send the contractor the corrected copy.

What Happens If You Issue a 1099 Late or Not at All?

The IRS charges a penalty for each form filed late and a separate penalty for each form not furnished to the contractor. The most recent tiers are:

Amounts adjust for inflation, so confirm the current figures on IRS.gov. If you missed a form for last year, file it now: the penalty tiers rise the longer you wait, and our CPA can help you decide the best way to catch up.

Prepare and File Your 1099s With Numeris Ledger

Whether you run a restaurant, a studio, a construction company, or a one-person business with a few helpers, most 1099 mistakes come from messy records, not from the form itself. Numeris Ledger keeps your contractors in a supplier directory and records what you pay each of them, so your totals come from payments you actually made. Payments made outside your bank, such as cash, still count toward a contractor's total, so make sure they're recorded too.

Whichever way you file, review each contractor's total against your own records first, including any cash or partial payments, and keep your own proof that each contractor received their copy. 1099 reports are available on the Plus plan. Read the details in our Sales, Purchases, and 1099 reports update.

Frequently Asked Questions

The information in this post is for general educational purposes only and does not constitute tax or legal advice. Every tax situation is different — talk to our CPA about yours.