If you paid a helper in cash during 2026, you send a 1099-NEC when the helper is not your employee, the work was for your business, and you paid that person $2,000 or more for the year. Cash counts the same as a check. The helper's copy and the IRS copy are due February 1, 2027.

How much can I pay a helper in 2026 before a 1099-NEC is required?

For payments made in 2026, the 1099-NEC threshold is $2,000 per helper for the year, up from $600 for payments made in 2025, according to the Instructions for Forms 1099-MISC and 1099-NEC. The One Big Beautiful Bill Act, Public Law 119-21, section 70433, raised the threshold for payments made after December 31, 2025, and the $2,000 is indexed for inflation starting in 2027.

The 1099-NEC reports nonemployee compensation, meaning pay for work in your business to someone who is not your employee, and the instructions require it when all four of these conditions are met.

• You made the payment to someone who is not your employee.
• You made the payment for services in the course of your trade or business.
• You made the payment to an individual, partnership, estate, or, in some cases, a corporation.
• You made payments to the payee of at least $2,000 during the year.

How you paid is not one of the four conditions, so cash counts the same as a check or an app transfer. Payments that are not made in the course of your business are personal payments, and personal payments are not reportable. A helper you paid less than $2,000 in 2026 gets no 1099-NEC from you, but you still keep the record of what you paid.

What do I need from my helper before I pay them?

Before the first payment, get a Form W-9 with the helper's name and taxpayer identification number. I would collect the W-9 from every helper before the first job, including one you expect to pay less than $2,000, because you won't know the year's total in advance. A sole proprietor can put either an SSN or an EIN on the W-9, and an EIN is free from the IRS.

If a helper whose pay is reportable gives you no TIN, you must hold back 24% of the payment as backup withholding and send it to the IRS under IRC section 3406, per the Instructions for the Requester of Form W-9. If you don't withhold, you can become liable for the uncollected amount yourself. Backup withholding attaches to reportable payments, so for 2026 it becomes an issue once a helper's pay crosses the reporting threshold, not on every small cash payment.

When is the 1099-NEC due, and what happens if I don't send it?

For payments made in 2026, both the helper's copy and the IRS filing are due Monday, February 1, 2027. The Instructions for Forms 1099-MISC and 1099-NEC set January 31 for giving the helper a copy and filing with the IRS, and January 31, 2027 falls on a Sunday, so the due date moves to the next business day. You can e-file through the IRS's online portal, IRIS (Information Returns Intake System), or file on paper, and the helper's copy can be filled in online at IRS.gov/Form1099NEC.

For forms due in 2027, Rev. Proc. 2025-32 sets the penalty at $340 per form not filed with the IRS and a separate $340 per copy not given to the helper, each dropping to $60 if corrected within 30 days of the due date. Intentional disregard, meaning deliberately ignoring the filing requirement, costs at least $690 per form. Those amounts apply to a business with average annual gross receipts of $5,000,000 or less.

Can I still deduct the cash I paid my helper?

Cash pay to a helper you don't treat as an employee is deductible, and it goes on Schedule C line 11, contract labor, on the 2026 return. The Instructions for Schedule C define contract labor as payments to persons you do not treat as employees for services performed for your trade or business.

"I paid my workers and subcontractors cash. no 1099 forms. Do I say yes or no to this question?"

— a business owner on the TurboTax Community

Schedule C line I asks whether you made any payment that would require you to file a 1099. For a 2026 return, you check "Yes" if you paid any helper who is not your employee $2,000 or more in 2026 for work in your business, because that payment requires a 1099-NEC. Paying in cash does not change the answer.

The Tax Court allows a deduction for pay only when it is "reasonable in amount," "based on services actually rendered," and "paid or incurred." A tile installer who drove his crew to jobs in a pickup paid his helpers in cash in 2001 and filed no 1099s. In Tax Court he claimed $18,600 paid to his crew. He produced no records of the payments, and one helper testified that he had not filed a 2001 return because the owner never gave him a 1099. The court said the missing 1099s cast further doubt on the payments and allowed no deduction for the $18,600. The case is Thomas Edwards v. Commissioner, T.C. Summary Opinion 2007-182, a summary opinion that can't be cited as precedent.

The records to keep are the W-9, the date and amount of each payment, what the work was, and a receipt signed by the helper or a traceable payment. The same record list appears in our tax checklist for mobile service businesses, written for owners filing 2026 returns.

How do I know if my helper is a contractor or an employee?

For federal tax purposes your helper is an employee if you control or have the right to control what the helper does and how the work is done, and a contractor if you do not. The IRS sorts the facts into three categories on its independent contractor or employee page, which are behavioral control, financial control (how the helper is paid and who supplies the tools and supplies), and the type of relationship. Either side can file Form SS-8 for an IRS determination, which can take at least six months. If the helper is an employee, the pay is wages reported on Form W-2, not a 1099-NEC, and it goes on Schedule C line 26, not line 11.

If you live in California, does anything change for a helper paid in cash?

California presumes a helper is an employee unless all three parts of the ABC test are met, under Labor Code section 2775. The EDD's AB 5 page and the 2026 Employer's Guide, DE 44, lay out the three parts. The helper must be free from your control and direction in doing the work, the work must be outside the usual course of your business, and the helper must be customarily engaged in an independent business of the same kind. The second part is where a helper doing the same work you sell usually fails. Day labor and casual help are not excluded.

For an independent contractor, California has its own report, Form DE 542, due within 20 days, per the EDD's independent contractor reporting page. That page still lists a $600 trigger and ties the report to a required federal 1099, so whether a payment between $600 and $1,999 in 2026 needs a DE 542 is a question to confirm with the EDD. For California backup withholding, the $600 threshold still applies. If the helper is an employee, you register with the EDD within 15 days of paying over $100 in wages in a calendar quarter.

N&T Tax & Advisory Group is based in Santa Clarita and prepares tax returns for mobile service businesses remotely anywhere in the US.

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