Tax Filing Guide

1099-NEC Threshold: When You Don't Need to File

The Rule

File 1099-NEC if you paid $600 or more

You must file Form 1099-NEC for each contractor, freelancer, or non-employee you paid $600 or more during the tax year for services. The $600 is cumulative—add up all payments made to each person throughout the year.

Not sure if you need to file a 1099? This guide explains the $600 threshold rule, exceptions, and what to do when you're below the threshold.

$600

Filing threshold

Jan 31

Filing deadline

$60-$330

Late filing penalty

Per Year

Threshold is cumulative

The $600 Threshold Rule Explained

The IRS requires you to file Form 1099-NEC when you pay $600 or more to a contractor, freelancer, or other non-employee for services performed for your trade or business.

Key Points About the Threshold:

Cumulative: Add up ALL payments to each contractor for the year
Per recipient: Track each contractor separately
Includes exactly $600: If you paid exactly $600, you must file
Business payments only: Personal payments don't count

Example Calculation:

January payment to Freelancer A$200

April payment to Freelancer A$350

October payment to Freelancer A$150

Total to Freelancer A$700

Result: You must file a 1099-NEC for Freelancer A because total payments exceeded $600 (even though no single payment was over $600).

Source: $600 threshold per IRS Form 1099-NEC Instructions and Instructions for Form 1099-NEC.

Do I Need to File? Quick Examples

Use this table to quickly determine if you need to file a 1099-NEC:

Scenario	File 1099-NEC?	Reason
Paid contractor $750 total in 2025	Yes	Over $600 threshold
Paid contractor $500 total in 2025	No	Under $600 threshold
Paid contractor $300 in January, $400 in June	Yes	$700 cumulative exceeds threshold
Paid contractor $200/month for 3 months = $600	Yes	Exactly $600 meets threshold
Paid contractor $599 for the year	No	Below $600 threshold
Paid contractor via PayPal only	No	Credit card/payment processor files 1099-K

When You DON'T Need to File 1099-NEC

Even if you paid someone $600 or more, there are situations where 1099-NEC doesn't apply:

Payments made via credit card, debit card, or PayPal

Payment processor files 1099-K instead

Payments to corporations (C-Corp or S-Corp)

Corporations exempt except for attorneys/medical

Payments for merchandise or inventory

1099-NEC is for services, not goods

Payments to employees

Use W-2 instead, not 1099-NEC

Personal payments (not business)

1099-NEC only for trade/business payments

Rent payments

Use 1099-MISC Box 1, not 1099-NEC

The Credit Card/Payment Processor Exception

Important Exception

If you pay contractors exclusively through credit cards, debit cards, PayPal, Venmo, or other third-party payment processors, you do NOT file a 1099-NEC. The payment processor is responsible for issuing Form 1099-K if thresholds are met.

This prevents duplicate reporting to the IRS.

You File 1099-NEC:

Direct bank transfer (ACH)
Paper check
Cash
Wire transfer

Processor Files 1099-K:

Credit card payments
Debit card payments
PayPal, Venmo, Cash App
Square, Stripe payments

Under $600? Contractor Still Must Report Income

Important distinction: The $600 threshold only determines whether YOU must file a 1099-NEC. It does NOT determine whether the contractor must report the income.

Contractors must report ALL income on their tax return, even amounts under $600. The IRS can match bank deposits against reported income, so contractors should report everything regardless of whether they receive a 1099.

Record Keeping (Even Under $600)

Even if you don't need to file 1099s, you should maintain these records:

W-9 forms from all contractors

Verify TIN before any payment

Invoices from contractors

Document services provided

Payment records (checks, transfers)

Track cumulative amounts

Contracts or agreements

Establish contractor relationship

Annual payment summary per contractor

Determine if threshold met

Keep these records for at least 4 years after filing. If the IRS questions a deduction, you'll need documentation even for payments under $600.

Need to File a 1099-NEC?

If you paid contractors $600 or more, use our 1099-NEC generator to create IRS-compliant forms in minutes. Deadline is January 31st!

Generate 1099-NEC

Frequently Asked Questions

What is the 1099-NEC threshold for 2026?

The 1099-NEC threshold is $600. You must file Form 1099-NEC for any contractor, freelancer, or non-employee to whom you paid $600 or more during the calendar year for services performed for your trade or business. This threshold has been $600 since the form was introduced in 2020.

Do I need to file a 1099 for payments under $600?

No, you are not required to file Form 1099-NEC for payments under $600 to a single contractor. However, the contractor must still report this income on their tax return regardless of whether they receive a 1099. You should still keep records of all payments.

Is the $600 threshold per payment or per year?

The $600 threshold is per year (cumulative). You must total all payments made to a contractor during the calendar year. Even if each individual payment was small, if the total exceeds $600, you must file a 1099-NEC.

Do I have to file a 1099 if I paid via PayPal or credit card?

Generally no. When you pay contractors through payment processors like PayPal, Venmo, Square, or credit cards, the payment processor is responsible for filing Form 1099-K if thresholds are met. You don't file 1099-NEC for these payments to avoid duplicate reporting.

What happens if I don't file a 1099 when required?

Penalties for not filing required 1099s range from $60 to $330 per form, depending on how late you file. If you intentionally disregard the filing requirement, the penalty is at least $630 per form with no maximum. The IRS may also assess additional penalties and interest.

Do I need to file 1099-NEC for payments to an LLC?

It depends on the LLC's tax classification. Single-member LLCs and partnerships generally receive 1099-NECs. LLCs taxed as S-Corps or C-Corps are usually exempt (except for attorneys and medical providers). Check the W-9 to see how the LLC is classified.

If I'm not required to file, should I still issue a 1099?

You're not required to, but you can. Some businesses choose to issue 1099-NECs even for payments under $600 for their own record-keeping. The IRS won't penalize you for filing when not required, though the contractor may wonder why they received one for a small amount.

Does the $600 threshold include reimbursements?

No. Reimbursements for expenses (like travel or supplies) are not included in the $600 threshold, as long as they're documented and the contractor accounted for them separately. Only payments for services count toward the threshold.