Do I Need to Send a 1099 to a Subcontractor?

Yes, if you paid an unincorporated subcontractor for work in the course of your business and the total for the year reached the IRS threshold. For payments made in 2026, file Form 1099-NEC when you paid a sub $2,000 or more; for 2025 payments the threshold was $600. Payments to most corporations are exempt.

What is a 1099-NEC?

Form 1099-NEC is the IRS information return a business uses to report nonemployee compensation: payments for services to someone who isn't on your payroll. For a contractor, that's mostly subcontractors: the drywall hanger, the tile setter, the sub who runs your low-voltage wiring. You send one copy to the sub and one to the IRS, so the income you deducted as a cost shows up on their return.

The IRS instructions say to report only payments made in the course of your trade or business. Personal payments aren't reportable, so a homeowner who hires you to redo a bathroom doesn't send you a 1099. But when your company hires a sub for that bathroom, you do, if the threshold is met.

What is the 1099 threshold for 2026?

For payments made after December 31, 2025, you file Form 1099-NEC when you paid a subcontractor $2,000 or more during the calendar year. The old $600 threshold applies to payments made in 2025 and earlier. The change comes from the 2025 tax law the IRS now calls the Working Families Tax Cuts (the One Big Beautiful Bill Act), and the IRS says the $2,000 figure may be adjusted for inflation beginning in 2027.

Who gets a 1099-NEC and who doesn't?

The rule of thumb: unincorporated businesses get one, corporations generally don't. Ask for a W-9 before you pay anyone, because the box they check on it tells you which bucket they're in.

Do materials count toward the 1099 amount?

Yes, when the sub supplied them as part of the service. The IRS lists "payment for services, including payment for parts or materials used to perform the services" as reportable. If your roofing sub billed you $1,400 for labor and $900 for flashing and underlayment on the same job, the reportable amount is $2,300. Materials you buy yourself from a supply house are a different payment and aren't reported on a 1099.

How the 1099 rules work on a real job

How do you file a 1099-NEC?

1. 1

   Collect a W-9 before the first payment.

   Get the sub's legal name, business name, tax classification and taxpayer identification number (TIN). See how to collect a W-9 from a subcontractor.

2. 2

   Track payments by sub all year.

   Tag every payment to a sub in your books, and note how you paid (check, ACH, card). Card payments drop out of the 1099-NEC total.

3. 3

   In January, total each sub's payments.

   Anyone at $2,000 or more for 2026 (and not exempt) gets a 1099-NEC. Box 1 is the total nonemployee compensation.

4. 4

   File with the IRS and send the sub's copy by the deadline.

   Both are due January 31 (February 1, 2027 for 2026 payments). If you file 10 or more information returns of any type in a year, counting W-2s, the IRS requires you to e-file. The IRS's free IRIS portal handles 1099-NEC.

5. 5

   Check your state.

   Many states want a copy of 1099-NEC data, some through the federal/state program and some directly. See your state's tax guide.

What happens if a sub won't give you a W-9?

You have to start backup withholding: hold back 24% of reportable payments and send it to the IRS. That also applies when the IRS tells you a sub's TIN is wrong. If you don't withhold when you're required to, the IRS can hold you liable for the amount you should have withheld. In practice, most contractors simply won't release the first check until the W-9 is in hand.

Is a 1099 sub really a subcontractor?

Sending a 1099 doesn't make someone a contractor. The IRS looks at behavioral control, financial control and the relationship of the parties. A "sub" who works only for you, on your schedule, with your tools and your supervision, may legally be an employee, which means payroll taxes and a W-2 instead. Read W-2 vs. 1099 before you put a helper on 1099s, and run the numbers with the 1099 vs. W-2 cost calculator.

Common 1099 mistakes contractors make

• Using last year's threshold. For 2026 payments the line is $2,000, not $600. For 2025 payments it was $600.
• Leaving out materials the sub supplied. Parts and materials used to perform the service count toward the total.
• Sending a 1099 for card payments. Those are reported on Form 1099-K by the processor, so reporting them on a 1099-NEC double-counts the income.
• Skipping LLCs. An LLC is only exempt if it's taxed as a corporation. Single-member and partnership LLCs still get a 1099.
• Chasing W-9s in January. Subs are harder to reach once the job is paid. Collect it before the first check.
• Treating a full-time helper as a sub. That's a worker classification problem, not a paperwork problem.