Updated August 7, 2026. Quick answer: two things have to be right when you pay someone to help. First, whether they are a contractor at all — that is decided by how much control you have over the work, not by what you both agreed to call it. Second, the paperwork. The reporting threshold changed. The current IRS instructions require a Form 1099-NEC for each person you paid at least $2,000 in the course of your business, and the instructions state the change directly: “For tax years beginning after 2025, the minimum threshold amount for reporting certain payments required to be reported on certain information returns… increased to $2,000 and may be adjusted for inflation beginning in calendar year 2027.” Filing is due January 31.
The threshold changed, and most guidance has not caught up
The figure quoted above comes from the instructions revision dated 12/2026, which the IRS describes as being used to file 2026 information in early 2027. This is the tax-year-2026 rule.
An honest gap, stated because this is exactly the kind of number that gets laundered: we did not find, on the IRS pages we read, a restatement of the threshold that applied to nonemployee compensation paid during calendar year 2025. The current instructions state the new amount and its effective date but do not restate the old one, so we are not publishing a prior-year figure we did not read. If you are cleaning up an earlier year, get the threshold from that year’s own instructions rather than from any page — including this one — describing the current rule.
Do not confuse this with the 1099-K. That is a different form, reported by payment processors rather than by you, and it had its own separate and heavily publicised change: the 1099-K threshold and what actually happened to the $600 rule. A page that merges the two will be wrong about both.
Contractor or employee: the test is control
The IRS frames it as three categories of evidence, and these are its own questions:
- Behavioral control — “Does the company control or have the right to control what the worker does and how the worker does his or her job?”
- Financial control — “Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)”
- Type of relationship — “Are there written contracts or employee type benefits (that is, pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?”
Notice what is absent from all three: the label on the agreement. A signed contract calling someone an independent contractor is evidence under the third category and nothing more. If you set the hours, direct the method, supply the tools and expect the arrangement to continue indefinitely, you have hired an employee whatever the document says.
If it is genuinely unclear, the IRS decides: “Firms and workers file Form SS-8 to request a determination of the status of a worker for purposes of federal employment taxes and income tax withholding.” Note that either side can file it — including the worker, after the fact.
What getting it wrong costs
The IRS states the exposure plainly: “If you classify an employee as an independent contractor and you have no reasonable basis for doing so, then you may be held liable for employment taxes for that worker.” That is the employer’s side of payroll taxes on wages you have already paid out, arriving later.
There is a route back. The Voluntary Classification Settlement Program is described by the IRS as “a voluntary program that provides an opportunity for taxpayers to reclassify their workers as employees for employment tax purposes for future tax periods with partial relief from federal employment taxes” — under which an accepted applicant will “Pay 10 percent of the employment tax liability that would have been due on compensation paid to the workers for the most recent tax year”, will “Not be liable for any interest and penalties on the amount”, and will “Not be subject to an employment tax audit with respect to the worker classification” for prior years. It applies going forward, not retroactively.
If the person is helping in a home, this is the wrong page
Care work in a private home usually lands on the other side of the line, and the instrument is different: someone paid to care for a parent at home is almost certainly a household employee, and the 1099 you were about to issue is the mistake. That page owns the thresholds and the family exclusions; this one does not restate them.
Sources and limits
Quotations read 2026-08-07 from the IRS: Instructions for Forms 1099-MISC and 1099-NEC (12/2026), Independent contractor or employee, About Form SS-8, and Voluntary Classification Settlement Program. The $2,000 threshold is stated here as a tax-year-2026 figure and is subject to inflation adjustment from 2027, per the instructions themselves. State law tests for employee status are separate from the federal common-law test and are stricter in some states; this page covers the federal test only.
One category of payment that surprises people on the receiving end: directors’ fees are self-employment income and go on a 1099-NEC — explicitly including payments made after retirement.