Filing tax forms is never fun—but it’s important to stay ahead of changes that can reduce your reporting burden. It is also important to timely file required information returns to avoid being hit with a penalty for non-compliance.
If your business pays independent contractors (non-employees) for services, you must file IRS Form 1099-NEC if total payments exceed a specific threshold. For decades, this threshold has been $600 or more in a calendar year.
As a landlord, you are responsible for issuing Form 1099-NEC to any unincorporated independent contractor you paid at least $600 for work on your rental property during the year. The $600 threshold increases beginning with payments made in 2026 and later. This applies even if you hired them for a side job. This rule does not apply if you paid an incorporated business or if you hire a property management company that, in turn, hires the contractors.
Failure to file a correct and timely Form 1099 can result in significant IRS penalties that increase the longer the form goes unfiled. The penalties vary depending on how late the filing is and whether the failure was due to intentional disregard of the rules.
Form W-9
You are required to obtain an IRS Form W-9 for every non-employee (including a medical or legal corporation) before you make your first payment to the recipient. Make sure that the form is complete before you file it in your accounting system. Keep a centralized file for these documents. Be sure to get a new form if the non-employee moves or has any other change to their information.
For your information, a W-8 form allows non-US individuals and businesses to confirm they are not US taxpayers. A W-8 form from the US Internal Revenue Service (IRS) allows non-US individuals and companies to confirm they are not a US taxpayer. There are various variations of the W-8 form, each serving a distinct purpose.
When to file
- Businesses must complete a Form 1099-NEC by January 31 (or the next business day if the deadline falls on a weekend or holiday) to report payments of $600 or more (for payments made in 2025 and prior years; increases to $2,000 beginning with payments made in 2026) made in the previous tax year to each nonemployee who performed services for them.
- Businesses must file a Form 1099-MISC by March 1 if filing on paper or March 31 if filing electronically to report payments of at least $10 in royalties or at least $600 for items such as rent and medical or health care payments made to nonemployees and certain vendors in the previous tax year.
However, there are some exceptions to who needs to receive one of these forms. You do not issue a 1099-NEC to individuals and/or businesses:
- If you paid for physical products or goods — not services — then this form should not be issued.
- If the business you paid is a C corporation or S Corporation, then a 1099-NEC need not be issued. However, file a 1099-MISC to report payments for medical or health care, or attorney services. Additionally, the IRS outlines some other specific circumstances where a 1099-NEC should or should not be issued to a corporation.
Payments made to an LLC
You should send a 1099-NEC to any business that is an LLC if it is a disregarded entity. That is a single-member LLC taxed as a sole proprietorship. If you’re unsure how a business is classified, refer to the Form W-9. You should obtain the form from the vendor when you start working with them. In many cases, payments to C or S corporations are exempt from 1099 reporting and backup withholding. However, you will still need a completed W-9 to confirm their tax status.
Standard penalty for late filing
The penalty amount per form increases in tiers depending on how late you file the forms. The following figures are for forms due in 2025:
- Up to 30 days late: $60 per form.
- 31 days late through August 1: $130 per form.
- After August 1 or not filed at all: $330 per form.
Intentional disregard
If the IRS determines that the failure to file was due to intentional disregard of the filing requirements, the penalties increase.
- The minimum penalty is $660 per form (for forms due in 2025).
- Alternatively, the penalty can be 10% of the amount required to be reported on the form, whichever is greater.
The threshold for filing the 1099-NEC increases for payments made beginning in 2026.
The One Big Beautiful Bill Act (OBBBA) changed the rule beginning with payments made in 2026. You file Form 1099-NEC if you pay an independent contractor $2,000 or more during the year. Starting in 2027, this amount will be adjusted annually for inflation in $100 increments.
This welcome update means many businesses will have fewer 1099-NEC filing obligations.
Changes to Form 1099-K
The OBBBA also revised the filing rules for Form 1099-K. Third-party settlement organizations (TPSOs) such as PayPal, Venmo, Uber, and eBay use this form. These platforms are responsible for issuing 1099-Ks when payments meet certain criteria. For example, if you pay a contractor via PayPal, you (the contractor’s client or customer) do not file a 1099-K—PayPal does.
Key things to know about Venmo and the 1099-K
- Personal payments are not included: The 1099-K is only for payments for goods and services. Personal payments for things like splitting a dinner bill, sharing rent, or gifts are exempt from the calculation and are not taxable income.
- Business vs. personal transactions: Venmo allows users to tag payments as “goods and services,” which helps it categorize transactions for reporting purposes. I recommend that you use a separate Venmo Business Profile for business-related payments to avoid confusion
Key things to know about PayPal and the 1099-K
You classify PayPal payments as personal or business by choosing the appropriate PayPal account type and by categorizing the transactions within your accounting software. A personal account is for shopping and splitting expenses. A business should set up a separate business account under a company name for accepting card payments and using business tools like invoices and checkout options. You can use separate accounts for personal and business needs and then assign transactions to a specific income category in your accounting system to classify them correctly.
1099-K Threshold
Previously, the 1099-K threshold was $5,000 in 2025 and then $600 in 2026—potentially triggering billions of filings. However, the OBBBA reverses this change.
Effective retroactively to 2022 (yep, three years ago), TPSOs need to file Form 1099-K if both of the following apply:
· They pay the recipient more than $20,000.
· The recipient has more than 200 transactions during the year.
This rollback to the 2022 threshold results in the issuance of far fewer Forms 1099-K. Both TPSOs and recipients can breathe a sigh of relief.
A Final Reminder
Regardless of whether a taxpayer receives a 1099 form, all taxpayers must report all taxable income on their tax returns—even if a third party does not report it. Failure to report income can result in significant civil penalties, and in some severe cases, criminal prosecution.