Paying subs in 2026: the 1099-NEC line moved from $600 to $2,000

TL;DR: For payments made in 2026, you generally file Form 1099-NEC when a nonemployee sub receives at least $2,000 for business services during the calendar year. Get a W-9 before the first payment anyway, track every payment by method, and file the form by January 31, 2027.

A 2026 payment to a drywall sub, tile sub, roofer, painter, electrician, plumber, HVAC contractor, handyman, or other nonemployee service provider uses the new $2,000 federal line.

The old line was $600. That rule still applied to payments made during 2025. The $2,000 line applies to payments made after December 31, 2025.

The change came from section 70433(a) of the law commonly called the One Big Beautiful Bill Act, Public Law 119-21, signed July 4, 2025. It changed section 6041 of the tax code. The IRS discussed the change in Internal Revenue Bulletin 2026-19.

The $2,000 line applies to services paid during 2026

You generally file Form 1099-NEC for each person you paid at least $2,000 during the calendar year, in the course of your business, for services, when that person is not your employee.

The form is not for employees. Employees belong in the W-2 payroll system. This article covers subs and helpers who are not employees.

The 2026 forms are due in January 2027. The copy sent to the sub and the filing sent to the IRS are both due by January 31.

Starting in calendar year 2027, the $2,000 line may be adjusted for inflation. Do not hard-code $2,000 into your bookkeeping forever. Check the number each year.

The higher line does not eliminate the W-9

Form W-9 is used to request a payee’s taxpayer identification number, or TIN.

Get a W-9 from every sub and helper before the first payment, even when the first job is small. You cannot know in March whether that sub will receive at least $2,000 from you by December.

The pattern shows up over and over in small shops. A new drywall or tile sub finishes a small first job in spring. Everyone is busy. The W-9 request gets skipped.

Then January arrives. The owner sits at the kitchen table, adds up checks, and finds that the sub crossed the line. The sub has moved, changed numbers, or stopped answering.

Asking for a W-9 before the first check takes one minute. Asking after the last check can take weeks.

The higher line makes this worse, not better. Owners now assume most subs will not count. They skip the form more often. That leaves them with less information when they need to prepare the forms.

One running total is not enough without the payment method

Keep one running total for each sub for each calendar year. Record the payment method next to every payment.

Track checks, bank transfers, cash, credit cards, and third-party payment networks separately. Credit card and third-party payment network payments are reported on Form 1099-K by the payment company, not on a 1099-NEC by you. Do not count those payments toward the sub’s 1099-NEC total.

This is where a basic payment list beats a memory check. Your records should show who was paid, when, how, and how much.

Use the same habit for a sub who works on a roof, a bathroom, a flooring job, a service call, or a remodel. The trade does not change the recordkeeping task.

A written handoff before work starts also helps keep the payee information in one place. Use a crew handoff page before day one for the job details, then keep the W-9 with your payment records.

A sub’s business type can change whether you file

Look at the W-9 to see whether the sub is a corporation. Payments to a corporation, including an LLC taxed as a C corporation or S corporation, generally do not need a 1099-NEC.

The exception is fees paid to attorneys. Those are still reported.

The W-9 gives you the payee information used to make this classification. Do not rely on what the sub calls the business in a text message or on an invoice. Use the completed W-9 and ask your tax preparer about anything that does not make sense.

Materials can be part of the reportable payment

Payments only for merchandise, freight, or storage are not reported on a 1099-NEC.

Parts furnished as part of a repair service are different. The IRS instructions treat the full repair payment as reportable, including the parts line. For a contractor, that means you generally count the whole payment when a sub supplies materials as part of the work performed for you, not just the labor line.

An unusual split between labor, materials, freight, or other charges needs a tax preparer’s review. Keep the invoice and ask about the treatment instead of making a guess based on the line items.

Missing taxpayer information can trigger 24 percent withholding

If a payee fails to provide a correct TIN, you may be required to withhold 24 percent from reportable payments and send that money to the IRS. This is called backup withholding.

That is another reason to request the W-9 before the first check. You have the payee’s information before the payment record grows, instead of chasing it after the year closes.

A W-9 does not answer every tax question. It gives you the taxpayer identification information and business classification you need for your records. Confirm your own situation with your bookkeeper or tax preparer.

January is when you pull the list and file

In early January, review every sub’s calendar-year total. Pull each person at or above the applicable federal line. Check the payment method. Check the W-9. Check whether the payee is a corporation. Then file the copy to the sub and the filing with the IRS by January 31.

Owners who used to file many forms for totals between $600 and $2,000 will file fewer forms for 2026 payments. That saves time.

It does not remove the need for the W-9. It does not remove the need for a running payment record. It does not change the deadline.

State rules can differ from the federal rule. Some states have their own filing rules for payments to contractors. Check with your state tax agency.

Bella answers the phone while you do the January paperwork

The January paperwork week is also a week when many owners stop answering the phone.

Nail the Call’s receptionist, Bella, answers every call, day or night. She works out what the job is, books the visit on the owner’s real calendar, and texts the owner a summary of each call. Bella does not give tax advice. If a caller asks something she should not answer, she writes it down for the owner instead of guessing.

Plans are flat monthly: Starter $95, Growth $295, and Pro $495. There are no per-call limits, no per-minute meter, and no overage fees. Call (628) 895-9788.

Put these 2026 payment rules into your shop routine

• Request a W-9 from every sub and helper before the first payment.
• Keep one calendar-year total for each payee.
• Mark each payment as check, bank transfer, cash, card, or payment network.
• Do not count card or payment-network payments toward your 1099-NEC total.
• Review the W-9 for corporation status.
• Count materials supplied as part of repair work with the service payment.
• Review totals in early January.
• File the copy to the sub and the IRS by January 31.
• Check the federal line again for calendar year 2027.
• Ask your bookkeeper or tax preparer about unusual payments.
• Check your state tax agency’s contractor filing rules.

Do not wait until January to collect a W-9. Ask before the first check, record the payment method every time, and review each sub’s yearly total before January 31.