If you paid a subcontractor for work in 2026, the rule for when you owe them a 1099-NEC just changed. The IRS threshold moves from $600 to $2,000 for payments made this calendar year. After 2026, it adjusts for inflation.
Generally, paying the same subcontractor $900 during 2026 falls below this reporting threshold; $2,100 crosses it. These are forms covering 2026 payments, filed in the following year. Exceptions still matter: if backup withholding applies, a return may be required even below the usual threshold.
Request the appropriate tax information before paying a subcontractor, and keep accurate payment records. A missing or incorrect taxpayer identification number can trigger 24% backup withholding on covered payments. Check the IRS’s reporting, threshold and exemption rules before deciding how a particular payment must be handled.
The bigger question hanging over 2026: how a “subcontractor” gets defined in the first place. The Department of Labor’s 2024 independent-contractor rule is no longer being enforced in investigations, and DOL proposed in February 2026 to rescind and replace it with a different economic-reality test. As of late July, there’s no final rule, so this is genuinely in flux. The IRS’s own common-law test, which looks at behavioral control, financial control, and the relationship between the parties, hasn’t changed and still applies regardless of what DOL does.
If you’re not sure whether someone working for you is a sub or should be on payroll, that uncertainty is the DOL rule’s fault, not yours. Either side of a working relationship can file IRS Form SS-8 to get an official determination if it matters enough.
Practical takeaway: Request tax information early and track each subcontractor’s running payment total through the year. Check the applicable reporting rules before preparing forms for the following filing season.
Local relevance: Northwest Arkansas has a high share of small subcontracting outfits, tile subs, punch-list crews, one- or two-person specialty trades, who get paid in amounts that used to guarantee a 1099 and now might not. Fewer 1099s doesn’t mean fewer tax obligations for the sub; it just changes GCs’ paperwork.
For the full federal compliance chapter, EIN, estimated taxes, SE tax, W-4/I-9, OSHA reporting, all source-linked, see The NWA Trade Guide’s contractor directory.
Sources
Correction October 10, 2026: Clarified the 2026 reporting threshold, following-year filing and backup-withholding wording. Originally published July 29, 2026.