Yes. Paying a contractor in cash doesn't change your 1099 obligation at all. If you paid them $2,000 or more for services during the year in the course of your trade or business, you file a Form 1099-NEC exactly as you would if you'd paid by check, ACH, or card. The payment method has no bearing on the reporting requirement. Only the dollar amount, the recipient, and the nature of the payment do.

Why would cash payments seem different?

Cash carries a reputation for being untracked, which leads some payers to assume it falls outside 1099 reporting the way it can fall outside a bank's records. It doesn't. The IRS reportable-payment test looks at what you paid and why, not how you moved the money. A contractor paid $3,000 in cash for landscaping work is reported exactly like one paid $3,000 by check.

Does the $2,000 threshold work differently for cash?

No. The threshold is $2,000 in aggregate payments for services during the calendar year, box 1a on Form 1099-NEC, regardless of how those payments were split across cash, check, or electronic transfer. Add up everything paid to that contractor for the year, across every payment method, before checking it against the threshold.

Does the contractor's business type change anything here?

Not for the cash question specifically. Whether the contractor operates as a sole proprietor, an LLC, or a partnership, cash payments for their services get the same 1099-NEC treatment once the $2,000 threshold is crossed. Payments to a corporation, including an LLC taxed as one, are generally exempt from 1099-NEC reporting outside a short list of carve-outs like attorneys' fees, but that exemption turns on the entity's tax classification, not on whether you paid in cash.

What should you actually do at the point of payment?

Collect a W-9 before or at the time of the first cash payment, not after the fact. Cash payments are the ones most likely to slip through year-end reconciliation, since there's no statement or transfer record prompting someone to flag them. Track the running total against that contractor by name and TIN as you go, the same way you'd track a vendor paid electronically.

Where this actually breaks at scale

Cash-paid contractors are the exact case a document-intake process needs to be built for, because there's no bank feed doing the tracking automatically. Firms handling a high volume of 1099 prep during vendor season are choosing between adding headcount, outsourcing the reconciliation, or automating the capture and threshold tracking itself, each with different cost and control implications. We compare those routes in tax preparation outsourcing for CPA firms.