One of the quiet but impactful updates in the One Big Beautiful Bill is a long-overdue adjustment to the Form 1099-NEC and 1099-MISC reporting rules.
Starting in 2026, businesses won’t need to issue a 1099 unless they pay $2,000 or more to a vendor or contractor — a dramatic increase from the current $600 threshold.
Here’s what you need to know:
What’s Changing?
Under current rules, if you pay a contractor, vendor, or service provider $600 or more in a calendar year, you must issue a Form 1099-NEC (or 1099-MISC for rent and other payments).
Starting January 1, 2026, the threshold will be:
$2,000, adjusted for inflation annually beginning in 2027
Applies to Form 1099-NEC, 1099-MISC, and any payments subject to backup withholding
The reporting threshold is now tied to calendar year, not taxable year
Annual Inflation Adjustment
The $2,000 threshold will rise automatically each year to keep pace with inflation, using the same cost-of-living adjustment method the IRS uses for tax brackets.
For example:
In 2027, if inflation is 3%, the threshold would increase to approximately $2,060, and so on.
Each year, the IRS will round to the nearest $100.
Who Benefits?
This change significantly reduces reporting burdens for small businesses, landlords, and gig platforms by:
Eliminating 1099s for small, one-off jobs under $2,000
Simplifying vendor tracking for year-end reporting
Reducing exposure to penalties for unfiled or incorrect 1099s
For example, if you pay a handyman $1,500 in 2026, no 1099 is required — even though it would be under current law.
Important Caveats
Payments still need to be tracked. Even if a 1099 isn’t required, the expense must be properly recorded for tax and audit purposes.
Backup withholding rules also adjust to this threshold — which means the $2,000 figure now governs when withholding may apply.
W-9 forms are still essential when onboarding vendors, even if you don’t end up issuing a 1099.
👋 Need help adjusting your 1099 process?
We help small businesses automate and stay compliant with IRS reporting, even as the rules evolve. Whether you issue a handful or hundreds of 1099s, we can ensure you’re filing the right forms at the right time — no stress, no penalties.
Reach out before year-end to review your current vendor payments and prepare for the $2,000 threshold transition in 2026.