W-9 Collection for Contractors: The 1099-NEC Threshold Changes to $2,000 for Tax Year 2026

For as long as most contractors have been in business, one number has governed 1099 paperwork: $600. Pay an unincorporated sub $600 or more in a year, and you file a 1099 reporting it. That number is finally changing.

Under the One Big Beautiful Bill Act signed in July 2025 (OBBBA, §70433), the reporting threshold for payments to independent contractors rises from $600 to $2,000, effective for payments made in calendar year 2026— meaning the 1099-NEC forms you file in early 2027. The law also indexes the threshold to inflation in later years.

Here is what that does and does not change for a small general contractor — and why it should not change your W-9 habits at all.

The quick refresher: W-9s and 1099-NECs

The two forms work as a pair. Form W-9 is what your subcontractor fills out for you: their legal name, business entity type, address, and taxpayer identification number (TIN — either an SSN or an EIN). You keep it on file; it never goes to the IRS. Form 1099-NEC is what you file with the IRS (and send to the sub) each January, reporting the nonemployee compensation you paid them during the prior year. You cannot file an accurate 1099-NEC without the information from the W-9.

Payments to corporations (C-corps and S-corps) are generally exempt from 1099-NEC reporting — but you only know a sub is an S-corp because their W-9 says so. That is one more reason the W-9 comes first.

What actually changes for tax year 2026

• The threshold: $600 → $2,000. For payments made in 2026, you generally only need to file a 1099-NEC for a payee you paid $2,000 or more during the year. Tax year 2025 (the forms due in early 2026) still uses the old $600 threshold.
• Inflation indexing. Starting after 2026, the $2,000 threshold adjusts for inflation, so expect the number to creep up in round increments over time.
• Backup withholding follows the same threshold. The dollar trigger for backup withholding on reportable payments is aligned with the new threshold as well.

For a typical GC, the practical effect is modest: most subcontractors you use for real scopes of work blow past $2,000 in a single invoice. The change mostly removes 1099 paperwork for one-off small payments — the $800 emergency repair, the $1,500 punch-list sub you used once.

Why you should keep collecting W-9s from everyone anyway

It is tempting to read "higher threshold" as "less paperwork" and stop collecting W-9s from smaller vendors. That is a mistake, for four reasons:

1. You cannot predict the year-end total in March. The sub you hired for a $1,200 job in spring comes back for a $6,000 job in the fall. Now you owe a 1099-NEC, and you are chasing a W-9 in January from someone you last paid months ago. The reliable rule is the one auditors and accountants have always recommended: W-9 before the first check, every vendor, every time.
2. Backup withholding is expensive insurance against a missing form. If a payee will not give you a TIN, the IRS generally expects you to withhold 24% from reportable payments. Collecting the W-9 up front — while the sub still wants to get paid — is how you avoid ever being in that position.
3. Your workers' comp auditor wants the same list. At your premium audit, the auditor uses your 1099s and W-9s to build the roster of subs you paid, then asks for a COI for each one (see our premium audit checklist). A complete W-9 file means that conversation takes minutes instead of days.
4. Entity type drives everything else. The W-9 tells you whether the vendor is a sole proprietor, LLC, or corporation — which affects both 1099 rules and, in many states, workers' comp exemption questions.

A simple W-9 collection process for a small GC office

1. Make it part of onboarding, not year-end. The W-9 request goes out with the subcontract or the first purchase order. The policy is one sentence: "We can't issue payment without a completed W-9 on file."
2. Use the current form and check it for completeness. Name, entity box checked, TIN present, signed. An unsigned or TIN-less W-9 is not on file — it is a to-do item.
3. Store W-9s more carefully than other paperwork. A W-9 often contains a Social Security number. It does not belong in a shared inbox or an open network folder. Keep W-9s in restricted storage, separate from documents your whole team browses. (This is why Subsured stores W-9s in a separate encrypted bucket and never runs them through AI processing — SSNs should not be floating through extraction pipelines.)
4. Refresh when something changes. A sub incorporates, changes their business name, or gets a new EIN — that is a new W-9. A quick annual "any changes?" check during renewal season catches most of these.
5. Track it alongside the COI. W-9 status belongs in the same tracker as insurance status — our free spreadsheet template includes a column for it. One list, one glance, and you know which subs are fully papered.

The bottom line

The threshold change is real and it is helpful — fewer 1099-NEC forms for genuinely small payments starting with tax year 2026. But the smart operating procedure is unchanged: collect a W-9 from every sub before the first payment, store it securely, and let your accountant apply the threshold at filing time with complete records in hand.

This article is general information, not tax advice. Thresholds, effective dates, and filing requirements can change, and your situation may involve state rules or edge cases not covered here. Consult your accountant or tax professional before making filing decisions.