1099 Filing for Small Business: A CPA's 2026 Guide

The text comes in the second week of January, almost every year, from somebody I like. “Do you remember the name of that guy who did the drywall in March? I need to send him a 1099 and I don’t have his info.” I do not remember the drywall guy. Neither does the client, really. What they have is a bank statement with a $3,400 Zelle to a first name, no W-9, and a deadline three weeks out.

I see some version of this roughly once a quarter, and in January I see it weekly. The 1099 itself is not hard. The hard part is that the work to make it easy had to happen in March, when you paid the drywall guy, and nobody told you that.

The short answer: if you paid a person or an unincorporated business $2,000 or more during 2026 for services, by check, cash, Zelle or transfer, you owe them and the IRS a Form 1099-NEC by February 1, 2027. If you paid by card or through a payment app’s business account, the processor reports it instead. If you don’t have their taxpayer ID, start asking today.

Who gets a 1099 from a small business?#

Anyone you paid $2,000 or more in a calendar year for services in the course of your business, who is not your employee and not a corporation. That’s the rule in one sentence. The rest of this post is the exceptions.

“Services” is broad: the sub who framed the addition, the cleaner who turns your rentals, the photographer who shot your listings, the bookkeeper, the designer, the landscaper at the office. Rent paid to a landlord for business space is reportable too, on Form 1099-MISC. Goods are not — $5,000 of lumber from a supply house is a purchase, and no 1099 is due.

Three things take a payee off the list:

• They’re a corporation. Payments to C corps and S corps are generally exempt, with two exceptions: attorneys’ fees and medical payments, reportable regardless of entity type, per the Instructions for Forms 1099-MISC and 1099-NEC. An LLC is not automatically a corporation. One taxed as a sole proprietor or partnership gets a 1099; one that elected S corp status does not. You find out by asking, which is what the W-9 is for.
• You paid by card or payment app. Payments made by credit or debit card, or through qualifying third-party payment networks, generally are reported under Form 1099-K rules rather than Form 1099-NEC. The processor reports those on Form 1099-K, and you don’t report them again on a 1099-NEC. Double reporting is a real and common mistake. Payments made by cash, check, ACH or Zelle generally remain the business’s reporting responsibility when the threshold is met.
• The payment was personal. A 1099 covers payments in the course of your trade or business. The person who cleans your own house isn’t on this list unless you’re deducting it.

What changed about the $600 threshold?#

For payments made on or after January 1, 2026, the threshold for Form 1099-NEC and most 1099-MISC reporting is $2,000 per payee per calendar year, up from $600. The change came in Public Law 119-21, the 2025 reconciliation act, section 70433, which amended Internal Revenue Code section 6041. From 2027 the figure is indexed for inflation, rounded to the nearest $100.

Two consequences. The number of 1099s a home-based business issues just dropped; the $800 pressure-washing job no longer generates paperwork. And the 24% backup withholding, which applies when specific conditions are met, such as a missing or incorrect taxpayer identification number, moved to the same $2,000 line.

Here’s the part nobody tells you: it’s a per-payee annual total, not a per-invoice test. Four $600 checks to the same handyman is $2,400, and he gets a 1099. If your records are organized by month instead of by vendor, you can’t see that without going back through twelve statements. The IRS doesn’t care that you didn’t know the threshold changed.

1099-NEC vs 1099-MISC — which form, and what’s a W-9 for?#

Form 1099-NEC (Nonemployee Compensation) is the one most small businesses file. Form 1099-MISC covers the leftover categories. Form W-9 is not a 1099 at all; it’s the request you send the payee so you have what you need to fill one out. A 1099-K is what the payment processor files, not you.

The one that trips people up: your commercial landlord gets a 1099-MISC for rent. If he also charged you $2,500 to repaint the suite, he gets a 1099-NEC for that. Two forms, one person.

Contractor or employee — which is it?#

A contractor controls how the work gets done; an employee is told how, when and with what. That’s the heart of the test, and it doesn’t care what the contract says. IRS Topic 762 and Publication 15-A break it into behavioral control, financial control, and the type of relationship.

In practice, the questions that decide it: Do they set their own hours and bring their own tools? Do they work for other customers, and could they lose money on a job? Did you hire them for a project or for an open-ended role? Do you train and supervise them daily?

The cleaner who turns your three rentals on her own schedule, with her own supplies, for six other property clients: contractor. The “contractor” who’s been at your shop 40 hours a week in your truck for three years: an employee you’ve been underpaying payroll tax on, and the 1099 is the least of your problems. If you’re honestly unsure, Form SS-8 asks the IRS to decide, though it takes months. If the answer is “employee,” you need a payroll provider.

Do I need to issue a 1099 to my house cleaner?#

If the cleaner works on your business space or rental properties and you paid $2,000 or more in 2026 by check, cash or transfer, yes. If she cleans your own home and you aren’t deducting it, no.

The gray zone is the home-based business: you deduct 15% of your home as an office and pay a cleaner $3,000 a year for the whole house. The business share is $450, well below the line, and I tell clients not to overthink it. But if the same cleaner also turns your short-term rental, those payments are business, count them separately, and that total alone usually crosses $2,000.

What happens if I don’t file, or file late?#

A penalty per form, scaled by lateness, charged twice — once for the IRS copy and once for the recipient copy. The amounts adjust annually and run from roughly $60 a form for a few weeks late into the hundreds for forms filed after August or never; current figures are in the General Instructions for Certain Information Returns.

The quieter consequence: you deducted those payments on your Schedule C. In an exam, the first question about a $14,000 contract-labor line is “where are the 1099s?” No forms, no W-9s, payees named “Mike – drywall” in the register, and the deduction becomes an argument.

How do I file a 1099 — step by step?#

Done in October, this takes an afternoon. Done in late January, it takes a weekend and some apologizing.

1. Pull every vendor you paid in 2026, with annual totals. By payee, not by month or check number. Everything hinges on this step, and it’s the one most people can’t do without a spreadsheet hunt.
2. Strike the ones that don’t need a form. Paid by card or payment app: out. Goods, not services: out. Under $2,000 for the year: out. Corporations: out, unless legal or medical.
3. Collect a W-9 from everyone left. Form W-9 is free on the IRS site. Check the entity box: C or S corporation comes off the list; individual or single-member LLC stays.
4. Decide NEC or MISC per payment type. Services on 1099-NEC, including attorney fees for legal services. Rent, prizes and gross proceeds paid to an attorney on 1099-MISC. One vendor can get both. A special rule for attorneys: payments for legal services generally have a $2,000 reporting threshold beginning in 2026, but gross proceeds paid to attorneys, such as certain lawsuit settlements paid through an attorney’s trust account, generally remain subject to a $600 threshold on Form 1099-MISC. Both can apply even when the law firm is incorporated.
5. Pick how you’ll file. Ten or more information returns in total for the year, W-2s included, and you must e-file. Under 10, paper is allowed but needs the official scannable red-ink Copy A. In practice nearly everyone uses the free IRIS system, a filing service, or their CPA. The older FIRE system is being retired.
6. Send the forms by February 1, 2027. Copy A to the IRS, Copy B to the recipient, same day. Keep Copy C. IRIS and most services send the recipient copy for you.
7. File the vendor list, the W-9s and your copies together. Four years minimum. When the drywall guy calls in 2029 saying the IRS has a different number, this folder is the answer.

A Florida note#

Florida has no personal income tax, and for the typical small business there’s no state 1099-NEC filing. You file with the IRS and you’re done. Where the Florida Department of Revenue comes into your life is sales and use tax under Fla. Stat. ch. 212 — covered in Florida sales tax for home service businesses — and reemployment tax under ch. 443. Chapter 443 is where a misclassified “contractor” surfaces, because that’s the agency that decides whether your 40-hour sub was an employee for unemployment-tax purposes. Florida tends to find out before the IRS does.

How does simpleWhirks Books help at 1099 time?#

The January problem exists because payments were recorded by date and the question is asked by person. Here’s what Books does about that, and what it doesn’t.

Pay contractors through Bills and every payment stays under their name. In Bills (the Accounts Payable add-on), each bill and each payment belongs to a vendor record: “Dalton Drywall LLC,” not “Zelle – Mike.” Pay Dalton in March, June and September and all three land under the same name. In your bank register you apply the withdrawal to that vendor’s bills, so the bill, the payment and the bank agree with each other. Where I’ve seen 1099 totals go wrong is a spreadsheet that says $4,100 when the bank says $3,400 because a check got entered twice. Matching to the bank closes that gap.

The year’s payments to one vendor are a report. Open Vendor Activity, pick the vendor, set January 1 to December 31, and every bill and payment for the year is on one screen. The Monthly Payments report, filtered to that vendor, shows the running year-to-date total. Export either to CSV, Excel or PDF and hand it to your filing service or CPA. It runs one vendor at a time, which for most home-based businesses means the five or six people you’d actually consider for a 1099.

A register line on its own doesn’t know who you paid. If you paid the drywall guy by Zelle and only categorized the withdrawal to Contract Labor in your bank register, Books knows what the money was for, not who it went to. The register keeps a description, not a vendor. That’s the habit to change this year: run contractor payments through Bills, and the January list is easily built.

What Books doesn’t do. Books does not file 1099s, generate Copy A, or e-file to IRIS. It gives you the clean numbers; the filing happens in IRIS, a service, or your CPA’s software. It doesn’t collect W-9s or store taxpayer IDs either. Keep the signed W-9s in a locked folder or your CPA’s portal, not in a notes field. And Books doesn’t do payroll. We’d rather say that plainly than let you find out in January.

If your 2026 payments are still sitting in a bank account with nothing attached, the mid-year bookkeeping cleanup guide walks through importing statements and catching up in one pass. Done now, step 1 is a report in January instead of a hunt.

About the author. Garrett Truman is a licensed Florida CPA (License #AC45159) and co-founder of simpleWhirks. He has spent over twenty years working with small businesses in finance and accounting roles, and works primarily with home-based businesses, trades and owner-operators in Northeast Florida. More from Garrett.

Tax rules and IRS forms change. This post reflects federal and Florida rules as of its last-updated date; verify against the sources below and talk to a CPA about your own situation.

Sources cited: IRS, Instructions for Forms 1099-MISC and 1099-NEC · IRS, General Instructions for Certain Information Returns · IRS, Topic No. 762, Independent Contractor vs. Employee · IRS, Publication 15-A · IRS, About Form W-9 · IRS, E-file Forms 1099 with IRIS · Public Law 119-21, §70433, amending IRC §6041 · Florida Department of Revenue, Sales and Use Tax