The IRS has seemingly a million tax forms, but only some of them are relevant to contractors like you. One you absolutely need to know about is the 1099-NEC.
After the One Big Beautiful Bill Act (OBBBA) passed in July 2025, changes were made to the reporting of the 1099-NEC that could affect your taxes in 2026 and beyond. That’s why we spoke to tax pro Jonathan Medows, CPA of Medows CPA PLLC to discuss what the 1099-NEC is, how it differs from a 1099-K, and why it’s relevant for contractors.
What type of contractor typically gets a 1099-NEC?
If you’re reading this, it’s probably you! Medows says that “independent contractors, freelancers, and gig workers who are paid $600 or more for services [they provided] during the year” all should receive 1099-NEC forms. Remember, full-time regular payroll employees get sent a W2. But if you’ve provided services to a company in a role like a “consultant, designer, repair professional or delivery driver,” the 1099-NEC is a form you’ll need to get familiar with.
How does a 1099-NEC differ from a 1099-K?
We’ll let the tax expert explain this one. “A 1099-NEC is issued by businesses to report payments made directly to nonemployees for services,” Medows says. “A 1099-K is issued by third-party payment processors (like PayPal) to report aggregate payment transactions.”
Let’s break this down. If you’re a freelance graphic designer and you’ve earned more than $600 from your clients directly, you’ll receive a 1099-NEC. If you drive for a ride-sharing service, earn more than $20,000 and have over 200 transactions on a payment processor, you can expect to receive a 1099-K for your work. Keep in mind, these thresholds are true as of September 2025. “These thresholds have been debated, and may change,” Medows notes.
What changes were made to 1099-NEC reporting from the OBBBA?
Remember when you read a few sentences ago that if you earned more than $600 from a business, you’d receive a 1099-NEC form? It’s all changing next year. Beginning in 2026, the reporting threshold for 1099-NEC will increase from $600 to $2,000. So if you earn less than $2,000 from a company for your services, you will not receive a 1099-NEC.
Why is this happening? “These changes aim to reduce administrative burden for small businesses and clarify reporting obligations,” Medows says. And of course, there’s even more change to come. “Beginning in 2027, the threshold will be indexed to inflation, reducing the number of forms issued over time,” he explains.
What if a contractor makes income that doesn't reach the threshold of a 1099-NEC?
Keeping up-to-date records of payments, invoices and receipts is important for any freelancer who wants to stay on top of their taxes, Medows says. (Protip: there are online payment management services that can make this process easier for you, like Wingspan!)
Here’s why keeping tabs on your business finances is so important: even if you don’t receive a 1099-NEC, it doesn’t mean you don’t have to report the income. “[Contractors] must still report all income on their tax return, even if no 1099-NEC is received,” Medows explains. “Use Schedule C to report gross income and deduct business expenses.”
Now that you know more about the 1099-NEC, it’s up to you (or a tax pro) to do the rest. Make things easier on yourself by using Wingspan, which supports your business with invoicing, bookkeeping, and benefits solutions, so you can focus on doing the work you love – learn more.
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