1099 Cheat Sheet for Small Businesses
By Steve Koch, Treasurer
2026 payments to be filed January 2027. General educational guidance, not tax advice for a specific situation. Check with your accountant on your own facts.
The 60-Second Version
If your business pays an unincorporated vendor $2,000 or more in a year for services, you probably owe them a Form 1099-NEC by January 31. Collect a W-9 before you pay anyone new, and you'll have everything you need at year-end.
New threshold: $2,000. For payments made on or after January 1, 2026, the reporting threshold for 1099-NEC and 1099-MISC rose from $600 to $2,000 (One Big Beautiful Bill Act, P.L. 119-21). The amount is indexed for inflation for years after 2026. Practical effect: fewer forms, but the same paperwork discipline. Vendor totals move throughout the year, so track every vendor and collect every W-9 as if they will cross the line.
Which Form?
1099-NEC (Nonemployee Compensation): the common one. Payments for services to contractors, freelancers, consultants, subcontractors, board members. Threshold: $2,000.
1099-MISC: rent paid to a landlord, prizes/awards, other income, and gross proceeds paid to an attorney (settlements). Royalties have a low $10 threshold; most other boxes are $2,000.
Who Gets a 1099 (and Who Doesn't)
Issue one to (when paid in the course of your business, over the threshold):
Individuals, sole proprietors, partnerships, and LLCs taxed as sole prop/partnership
Attorneys / law firms, even if incorporated (legal services → 1099-NEC; settlement gross proceeds → 1099-MISC box 10)
Medical & health-care providers, even if incorporated
Usually skip (no 1099 needed):
C-corporations and S-corporations (except the attorney/medical exceptions above)
Payments for merchandise, inventory, freight, storage, or rent to a real estate agent/property manager
Employees (they get a W-2, not a 1099)
The Credit-Card / App Rule (Avoid Double-Reporting)
If you paid a vendor by credit/debit card or a third-party app (PayPal, Venmo business, Stripe, etc.), do NOT put it on a 1099-NEC. The payment processor already reports those on a 1099-K. Only report amounts you paid by cash, check, or ACH/bank transfer.
Get the W-9 Up Front
Before the first payment to a new vendor, collect a Form W-9. It gives you their:
Legal name and business name
Taxpayer ID (SSN or EIN)
Entity type (tells you whether a 1099 is even required)
Address
No W-9 / no TIN? You may owe 24% backup withholding on their payments, so make the W 9 a condition of getting paid. Collect one from every new vendor, including those you expect to stay under $2,000.
Deadlines & Filing
1099-NEC: to the recipient and the IRS by January 31. For 2026 payments that is Monday, February 1, 2027 (January 31 falls on a Sunday).
1099-MISC: to the recipient by Jan 31 (some boxes Feb 15); to the IRS by Feb 28 (paper) / March 31 (e-file). For 2026 payments: Feb 1, 2027 to recipients, March 1, 2027 paper, March 31, 2027 e-file.
E-file requirement: if you file 10 or more information returns total (all types combined) for the year, you must e-file (IRS IRIS portal or a payroll/filing provider).
Late/missing forms carry per-form penalties that grow the longer you wait, so keep W 9s and totals organized all year.
State rules may differ. Some states still require reporting below the federal threshold, so confirm before you drop a vendor from the list.
Year-End Checklisst
1. Pull a vendor payment report for the year (by vendor).
2. Filter out corporations, merchandise, and card/app payments.
3. Confirm a W-9 on file for every remaining vendor over $2,000.
4. Confirm cash/check/ACH totals meet the threshold.
5. Prepare and send 1099-NEC/MISC by the deadline; keep copies.
Questions on your own vendor list? Primary Care Financial handles bookkeeping and 1099 prep for founder-led businesses across metro Detroit. Head to www.pcfdetroit.com to book an appointment.
