The One, Big Beautiful Bill Act (OBBBA) introduces a significant modernization to IRS reporting rules. Starting with payments made in 2026, the threshold for reporting certain business payments will increase from $600 to $2,000. From 2027 onward, this threshold will be adjusted annually for inflation.
Current IRS Reporting Rules
For decades, businesses have been required to file Form 1099-NEC (formerly 1099-MISC) for payments to independent contractors exceeding $600 in a calendar year—a threshold unchanged since the 1950s. The same $600 threshold applies to Form 1099-MISC, which covers payments such as rents, prizes, and legal fees.
Deadlines:
- Form 1099-NEC: Must be filed with the IRS and sent to the recipient by January 31 of the following year.
- Form 1099-MISC: Also due to recipients by January 31, but IRS filing deadlines vary:
- Paper filing: Due by February 28
- Electronic filing: Due by March 31
New Threshold: $2,000
Under the OBBBA:
- Businesses will only need to issue 1099s for payments exceeding $2,000.
- This change reduces paperwork and administrative burden, especially for small businesses.
- It aligns reporting requirements with inflation and today’s economic realities.
Example: If your business pays a freelance designer $650 in 2025, you must issue a 1099-NEC for that year. But if the same designer earns $1,950 in 2026, no 1099 is required unless the total exceeds $2,000.
Important Note on Taxable Income
Even if a contractor doesn’t receive a 1099 due to the new threshold, the income is still taxable. Contractors must report all business income on their tax returns unless an exclusion applies. Businesses must continue to maintain accurate records of all payments.
Changes to Form 1099-K
The OBBBA also restores the previous threshold for Form 1099-K, used by third-party payment processors:
- Reporting resumes at $20,000 and 200 transactions.
- This reverses the lower thresholds introduced by the 2021 American Rescue Plan Act, which had been gradually reduced toward $600.
Simplification and Relief
These updates will ease compliance for millions of businesses, especially those relying on independent contractors. The higher threshold reduces the risk of IRS penalties for missed filings and streamlines operations.
If you have questions about how these changes affect your business or filing obligations, feel free to reach out for guidance.