The 1099-NEC from your prop firm

Updated October 26, 2026 · For the 2026 tax year

If a prop firm paid you as an independent contractor, it reports your payouts to the IRS on Form 1099-NEC, "nonemployee compensation." Here's what that form means for your taxes and what to check when it arrives.

Why a 1099-NEC and not a W-2

A W-2 is for employees, and tax is withheld from their pay. Funded traders are usually independent contractors, so the firm pays the full payout with nothing withheld and reports it as nonemployee compensation on a 1099-NEC. That's why the tax is self-employment income and why you have to pay it during the year yourself.

The 2026 threshold is $2,000

For payments made in 2026, a business generally files a 1099-NEC when it pays you $2,000 or more in the year. For payments before 2026 the threshold was $600. From 2027 the $2,000 figure is set to be adjusted for inflation.

The threshold only decides whether the firm has to send a form. It doesn't change what's taxable. A $1,500 payout from a firm that sends no form is still income you report.

When it arrives

Firms must send the 1099-NEC to you and file it with the IRS by January 31 of the next year, so for 2026 payouts, by early 2027. It may come by email or through the firm's or its payment provider's dashboard rather than by mail.

What to check on it

• The total matches the payouts you actually received from that firm in the calendar year. Keep your own log, because firms sometimes count payment dates differently.
• Your name and taxpayer number are correct. If you gave the firm a W-9, they should match it.
• No tax withheld. Federal withholding is usually blank. If it isn't, that amount counts as tax you've already paid.

If the amount is wrong, ask the firm for a corrected form before you file.

Several firms, several forms

Traders funded at several firms get a form from each one that paid them $2,000 or more, and no form from the rest. Add up every payout from every firm, not just the forms, and subtract your trading costs.

Don't wait for the form

The 1099-NEC shows up after the year is over, but the tax on those payouts was due during the year. Track payouts as they land and set aside your share each time. The free calculator shows how much.

Sources

• IRS, Am I required to file a Form 1099 or other information return?: $600 before 2026, $2,000 in 2026
• IRS, Instructions for Forms 1099-MISC and 1099-NEC: nonemployee compensation of $2,000 or more, January 31 deadline
• IRS, Publication 1099: inflation adjustment of the threshold from 2027

Estimates and general information, not tax advice. Confirm with a CPA before you act.