The 1099-NEC threshold for 2026 is $2,000, up from $600. A Michigan service business that pays subcontractors, helpers or a bookkeeper who is not on payroll only issues a Form 1099-NEC to a person it paid at least $2,000 for services during 2026, and the forms are due February 1, 2027. The change cuts the number of forms most small contractors send. It does not cut the record-keeping, because the same $2,000 line now decides backup withholding, Michigan follows it, and the only way to know who crossed it in December is to have tracked every payment since January.
In short
- $2,000 is the 1099-NEC and 1099-MISC reporting threshold for tax years beginning after 2025, up from $600, with inflation adjustments from 2027 (IRS, 2026).
- February 1, 2027 is the filing date for 2026 forms, because January 31 falls on a Sunday (Xero, 2026).
- $20,000 and 200 transactions, both, is again the threshold for a payment platform to issue a Form 1099-K (IRS, 2026).
- 10 forms is the point at which e-filing is required, both federally and, from tax year 2025, in Michigan (IRS, 2026; Culver CPA Group, 2026).
What changed, exactly
The IRS instructions for 2026 are short on this. File Form 1099-NEC for each person to whom you paid "at least $2,000 in: Services performed by someone who is not your employee." Publication 1099 adds the part most owners miss: the $2,000 figure is the threshold for reporting "and/or perform backup withholding on those payments," and it "will be adjusted for inflation beginning in calendar year 2027. Previously, the threshold amount was $600."
Three rules did not change. Payments to a corporation, including an LLC taxed as a C or S corporation, are still generally not reported, with exceptions for attorneys' fees and medical payments. The deadline is still January 31 under the statute. And you still file if the total reaches the threshold across several jobs, not per job.
The change is also narrower than it sounds. It applies to payments for tax years beginning after 2025, so the forms you file in January 2026 for 2025 still used the $600 line. The $2,000 threshold shows up for the first time on forms filed in early 2027.
Why the old habit breaks
Most small contractors handled 1099s one way: pay the sub, collect a W-9 when the accountant asks in January, send forms to everyone who got more than a few hundred dollars. At $600 that was crude but safe, because nearly every regular sub crossed the line. At $2,000, the list of who needs a form depends on exact annual totals per payee, and a sub paid $1,900 by November and $300 in December needs one while the helper paid $1,950 all year does not.
Six things to set up before December
- Collect a W-9 before the first payment, from everyone. Xero's guide puts it plainly: collect a W-9 before you pay a contractor. The threshold decides who gets a form. It does not decide who you need a taxpayer identification number from, and chasing one in January from a sub you paid in April is the slowest part of the job.
- Keep a running total per payee. Name, taxpayer ID, entity type, and year-to-date paid. When someone crosses $2,000, you want to know that day, not on January 20.
- Split payments by how they were made. Xero notes that payments made by credit card or through a third-party processor such as PayPal are not reported on your 1099-NEC. The platform handles those on Form 1099-K, and only when the payee passes $20,000 and 200 transactions in the year. Cash, cheque and bank transfer count toward your 1099-NEC total. Card and app payments do not.
- Mark every payee's entity type. A sub who is an LLC taxed as an S corporation generally does not get a form. A sole proprietor or a single-member LLC taxed as a sole proprietor does. The W-9 says which.
- Plan to e-file with the IRS and with Michigan. The IRS requires electronic filing once you file 10 or more information returns of all types combined. Culver CPA Group reports that Michigan cut its own e-file threshold from 250 forms to 10 starting with tax year 2025, and that Michigan Treasury Online offers free e-filing.
- Do not assume the federal filing reaches Lansing. Thomson Reuters reported in May 2026 that Michigan participates in the Combined Federal/State Filing Program but does not currently receive copies of filings submitted through the IRS's IRIS system. If you file through IRIS, confirm the state copy separately with your accountant.
The mistake most owners make at step 3
They add up everything they paid a sub, from every account, and send a form on the total. A roofer who paid a helper $1,200 by bank transfer and $1,500 through a payment app has paid $2,700, but only $1,200 counts toward the 1099-NEC, so no form is due. A form on the full $2,700 reports money that was not yours to report, and for a payee busy enough to get a 1099-K from the platform, the same payments end up reported twice. Tag the payment method on every payment, and the totals come out right on their own.
What filing late costs
The IRS penalty table for information returns due in 2026 sets the per-return penalty at $60 if a return is up to 30 days late, $130 if it is filed 31 days late through August 1, and $340 after August 1 or if it is never filed. Intentional disregard is $680 per return. The amounts are adjusted from year to year, so check the table for returns due in 2027 when the IRS publishes it. For a contractor with eight subs, a missed February deadline on every form is a four-figure problem that took one lost afternoon to create.
Where Michigan differs
Very little, on the threshold itself. Culver CPA Group states that "the State of Michigan follows federal IRS guidelines" on which 1099 forms are required, so $2,000 is the Michigan number for 2026 too. The difference is in the filing: Michigan's 10-form e-file rule and the IRIS gap above. If you pay subs who live in Wisconsin, check that state separately: Thomson Reuters reported that Mississippi and Wisconsin remained at $600 until their own laws are amended.
What we build for this
For a service business, the problem under the 1099 change is the record: who you paid, how, how much, and which W-9 is on file. On the back office side, we build document and form intake that captures a W-9 into the payee's record the day it arrives, and we replace the spreadsheet a business runs its subcontractor payments on with a record that keeps the year-to-date total per payee and flags the ones approaching the threshold. We do not prepare or file tax forms or give tax advice; your accountant does that, from a list that is already right. The rest of our services for local businesses are listed in one place, and the Michigan minimum wage guide covers the payroll side of the same January.
Fewer forms this year. The same bookkeeping, done earlier.
