Deadlines, Penalties and Best Practices for 1099 Compliance for the 2026 Filing Season

As more businesses rely on independent contractors and third-party vendors, understanding Form 1099 reporting is important. Whether you are issuing payments for services, rent, royalties or other non-employee compensation, knowing when and how to file Form 1099 can save you time and avoid costly penalties.

Key Updates for 2025

  • Form 1099-NEC is still used to report nonemployee compensation.
  • Form 1099-MISC is used for other types of income such as rent, royalties and prizes.
  • Filing deadlines for 2026:
    • Form 1099-NEC: Due to IRS and recipients by Jan. 31, 2026.
    • Form 1099-MISC: Due to recipients by Jan. 31, 2026 and electronically to IRS by March 3, 2026.
  • Penalties for late filing:
    • $60 per form if filed within 30 days late.
    • $130 per form if filed between 31 days late and Aug. 1.
    • $330 per form if filed after Aug. 1 or not filed at all.

Form 1099 Q&A

Questions regarding Form 1099 are common. Becoming more familiar with 1099 reporting prior to year-end can make the process of organizing and submitting payment records during tax filing season easier and less time-consuming.

Q: What’s the difference between Form 1099-MISC and Form 1099-NEC?

Form 1099-NEC is used for reporting nonemployee compensation. Form 1099-MISC is used for other types of income such as rent, royalties and awards.

Q: What is the threshold amounts for filing Form 1099?

The standard threshold is $600 for most payments. However, royalties (box 2) and broker payments in lieu of dividends or interest (box 8) have a $10 threshold. Direct sales payments (box 7) have a $5,000 threshold.

Q: When do I need to process 1099 forms?

Form 1099-NEC is due by Jan. 31, 2026. Form 1099-MISC is due to recipients by Jan. 31, 2026 and electronically to the IRS by March 3, 2026.

Q: Are there any exemptions?

Yes. Personal payments and payments to corporations are generally exempt from Form 1099 reporting.

Q: What if I didn’t keep good records of vendor payments throughout the year?

It’s best to maintain thorough records throughout the year. Review and collect payment data before year-end to avoid penalties. Late filing penalties can be significant, so timely organization is key.

Best Practices for 1099 Reporting

  • Keep updated W-9 forms for all vendors.
  • Use accounting software to flag NEC and MISC vendors.
  • Consider automated payroll and outsourced bookkeeping to streamline reporting.
  • Review vendor payments before year-end to ensure compliance.

Key Updates for 2026

The reporting threshold for 1099-NEC has increased from $600 to $2,000 per vendor. This means businesses will only need to file a 1099-NEC for vendors who are paid $2,000 or more during the year, potentially reducing the number of forms required and simplifying year-end compliance. Take time to review your vendor payment records to determine which payments now fall below the new threshold and update your filing processes accordingly to remain compliant.

Questions?

Work with your tax professional so you can streamline the 1099 process for your business and save time in the long run.  As always, Adams Brown advisors are here to help.