Your Essential Guide to Form 1099-NEC and 1099-MISC Reporting
Contributors
As the start of the new year prompts many businesses to review their reporting and compliance obligations, questions around Form 1099 requirements often come into focus. Each year, businesses manage a high volume of vendor payments and expense tracking while addressing an important compliance question: which payments require a Form 1099? Contractor fees, equipment rentals and evolving IRS thresholds can make the answer less than clear.
Here's what makes 2026 an important year: The One Big Beautiful Bill Act (OBBBA) is bringing significant changes to 1099 reporting thresholds starting in 2026. If you're paying contractors, renting office space or working with freelancers, you need to understand both your current obligations and what's coming this year.
Our 1099 guide breaks down everything you need to know about Forms 1099-NEC and 1099-MISC with clear action items you can implement right now.
1. Form 1099-NEC: Nonemployee Compensation
This form is used to report payments for services performed by non-employees.
| Rule | Requirement |
| Purpose | Services (contractor fees, commissions, professional services) |
| Threshold | 2025: $600 or more
2026: $2,000 or more |
| Recipients | Individuals, Partnerships, LLCs (taxed as sole props/partnerships) |
Deadlines: The 1099-NEC deadline is firm. No extensions are available for filing the IRS copy.
| Recipient Copy | IRS Copy (Filing Deadline) |
| January 31 | January 31 |
2. Form 1099-MISC: Miscellaneous Income
This form reports various other business payments that are not compensation for services.
| Category | Threshold |
| Rent (office space, equipment, land) | 2025: $600 or more
2026: $2,000 or more |
| Medical & Healthcare Payments | 2025 & 2026: $600 or more |
| Gross Proceeds to Attorneys | 2025: $600 or more
2026: $2,000 or more |
| Royalties | 2025 & 2026: $10 or more |
| Direct Sales (for resale) | 2025 & 2026: $5,000 or more |
Deadlines:
| Recipient Copy | IRS Copy |
| January 31 | March 31 |
Action Item: Please ensure you have a completed Form W-9 on file for all non-corporate vendors before making the first payment to them. This step is critical for meeting the strict filing deadlines for Forms 1099-NEC and 1099-MISC.
3. Rent Payment Rules (Form 1099-MISC, Box 1)
| Rule | Details |
| What to Report | Rent for commercial real estate, office space, equipment rentals, storage facilities or land/pasture |
| Reportable Amount | 2025: $600 or more
2026: $2,000 or more in the normal course of business |
| Mixed Payments | If a payment includes both rent and an operator's labor (e.g., machine rental with operator), you must prorate the payment: Rent portion goes on 1099-MISC (Box 1) and Labor portion goes on 1099-NEC (Box 1). |
|
Rent Exemptions |
Do not report if the payment is made to a corporation (C-Corp or S-Corp). Do not report if you pay the rent to a Real Estate Agent or Property Management Company (they are responsible for reporting the rent paid over to the owner). |
4. Key Compliance Mandates
| Rule | Requirements |
|
W-9 Form |
REQUIRED from every vendor you pay. This form provides the correct name, address and Taxpayer Identification Number (TIN), the essential information for filing the 1099. |
| Backup Withholding | If you fail to obtain a correct W-9/TIN from a vendor, you may be required to withhold federal income tax (Backup Withholding) at a rate of 24% from future payments and remit it to the IRS. |
| Payments to Corporations | Generally, exempt from 1099 reporting, except for payments to Attorneys (legal services) and Medical/Healthcare providers. |
| Electronic Payments | Payments processed by a third party (e.g., credit card, PayPal, Square, etc.) are reported by the processor on Form 1099-K, not by you. |
Penalties for Non-Compliance
The IRS assesses penalties for late or incorrect filing. Aggregate all payments to a single vendor for the year; multiple small payments totaling over the threshold trigger reporting.
| Delay/Error | Penalty Per Form (Tax Year 2025) |
| Up to 30 days late | $60 |
| After August 1 or Not Filed | $330 |
| Intentional Disregard | $660 (or 10% of income reported, no cap) |
Simplifying 1099 Reporting
1099 compliance can be managed efficiently with the right preparation. Collecting W-9s early, tracking vendor payments throughout the year and understanding applicable thresholds can help reduce risk and avoid penalties.
The Moore Colson team can assist with if you have any questions regarding 1099 compliance.
