If you pay contractors, you'll probably need to send them a Form 1099-NEC each January. QuickBooks Online can prepare and e-file these for you, as long as your records are set up correctly during the year.
This year the reporting threshold has also gone up, from $600 to $2,000.
What changed: the new $2,000 threshold
For years, you had to file a 1099-NEC for any contractor you paid $600 or more in a year. Under the One Big Beautiful Bill Act, that threshold rises to $2,000 for payments made after December 31, 2025, and will be adjusted for inflation after 2026.
In practice:
- 1099s filed in January 2026, for 2025 payments, still used the $600 threshold.
- 1099s filed in January 2027, for 2026 payments, use the $2,000 threshold.
The same change applies to Form 1099-MISC, used for payments like rent. The IRS has issued proposed regulations to implement it, so check the IRS website for the latest guidance before you file.
Who needs a 1099-NEC?
Generally, you file a 1099-NEC for each person or business that:
- You paid for services (not goods) in the course of your business
- Is not your employee
- Is an individual, sole proprietor, partnership or LLC taxed as one of these
- You paid $2,000 or more during 2026
Usually no 1099 is needed for:
- Corporations (C or S corps), with exceptions, most notably payments to attorneys
- Payments by credit card, debit card or PayPal-type payment apps. The payment processor reports these on Form 1099-K instead.
- Payments for products or merchandise
- Employees, who get a W-2
Before you start: collect W-9s
Ask every contractor for a Form W-9 before you pay them. It gives you their legal name, address, tax classification and taxpayer ID. Without it you can't file an accurate 1099, and chasing W-9s in January is a headache.
Step by step: filing 1099s in QuickBooks Online
Intuit occasionally moves menus around, so the exact names on your screen may differ slightly.
1. Set up your contractors
Open each contractor's profile and make sure "Track payments for 1099" is turned on. Enter their details from the W-9: legal name, address and tax ID.
2. Start the 1099 process
Go to Payroll → Contractors (or Expenses → Vendors in some versions), then select Prepare 1099s.
3. Review your company information
Confirm your business name, address and tax ID. These have to match what the IRS has on file.
4. Map your accounts
Tell QuickBooks which expense accounts hold contractor payments, and which box on the form they belong in. For most contractor work that's Box 1: Nonemployee compensation on the 1099-NEC.
5. Review contractors and amounts
QuickBooks lists every contractor and the total you paid them. Check carefully:
- Is anyone missing?
- Are amounts right, with card and PayPal payments excluded?
- Is everyone over the threshold?
6. E-file and send copies
Choose E-file and follow the steps. QuickBooks files with the IRS and can email or mail copies to your contractors. Fees may apply for filing and mailing, depending on your plan. You'll get a confirmation once the IRS accepts the forms.
Filing deadlines
- January 31: the 1099-NEC is due to both your contractors and the IRS. If January 31 falls on a weekend, the deadline moves to the next business day.
- E-filing: if you file 10 or more information returns in total for the year (1099s and W-2s combined), you're required to file electronically.
- State filing: Texas has no state income tax, so there's no state 1099 filing in Texas. Other states may require it.
Common mistakes to avoid
- Waiting until January to collect W-9s
- Including card or PayPal payments in 1099 totals, which double-reports income
- Using a tax ID or name that doesn't match the W-9
- Missing contractors paid from personal accounts or by check outside QuickBooks
- Sending 1099s to corporations that don't need them, or skipping attorneys who do
- Still using the $600 threshold for 2026 payments
Late or incorrect 1099s carry IRS penalties per form, and the penalty grows the later you file. Getting the setup right during the year is far easier than fixing it in January.
Want 1099s handled for you?
I prepare and file 1099s as part of keeping clean QuickBooks books for small businesses across Texas and the US, all online. See my QuickBooks services, or book a short intro call before January arrives.
This article is general information, not tax advice for your specific situation. Thresholds and rules come from the IRS and can change.