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Form 1099 Filing in 2026: What the New IRS Rules Mean for Your Business

Author : Course Ministry | Published On : 05 Aug 2026

If you issue payments to contractors, freelancers, or vendors, the rules around Form 1099 just shifted in a big way. The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, rewrites several long-standing reporting thresholds — and businesses that don't adjust their bookkeeping now risk confusion, missed filings, or unnecessary paperwork come tax season.

Here's a plain-English breakdown of what's changing, who's affected, and how to prepare.

The $600 Threshold Is History

For decades, any business that paid an independent contractor $600 or more in a calendar year had to issue Form 1099-NEC. The same $600 trigger applied to Form 1099-MISC for things like rent, legal settlements, and prize money.

Starting with payments made in 2026, that threshold jumps from $600 to $2,000 — a substantial increase that Congress hasn't touched in years. This change comes under Section 70433 of the OBBBA, and beginning in 2027 the new $2,000 threshold will also be adjusted annually for inflation.

In practical terms: if you pay a freelance designer $1,800 for a project in 2026, you're no longer required to send them a 1099-NEC. But — and this matters — the recipient still owes tax on that income even if no form is issued. The threshold determines your filing obligation, not the payee's tax liability.

Backup Withholding Rules Move With It

Payroll and AP teams should also note that backup withholding requirements will now apply only once total payments to a vendor exceed the new $2,000 mark, keeping withholding rules aligned with the updated reporting threshold. If you've built vendor onboarding checklists around the old $600 trigger, they need updating.

Form 1099-K: Back to $20,000

Payment app users — think PayPal, Venmo, and similar third-party settlement organizations — get a different kind of relief. The IRS confirmed in Fact Sheet 2025-08 that the OBBB retroactively reinstated the pre-American Rescue Plan Act threshold, meaning third-party settlement organizations are not required to file Form 1099-K unless a payee's gross reportable transactions exceed $20,000 and the number of transactions exceeds 200 in the year. This effectively undoes the phased-in $600 threshold that had been scheduled to take full effect and reverts the rule to where it stood before 2022.

New Boxes for Tips and Overtime

There's another wrinkle for 2026 filings tied to the OBBBA's "No Tax on Tips" and "No Tax on Overtime" provisions. Forms 1099-NEC and 1099-MISC include new boxes for tax year 2026 so payers can separately report qualified tips and overtime compensation, supporting the new deductions available to eligible recipients. If your accounting software hasn't been updated to capture this breakdown, now's the time to check with your provider.

Don't Forget: E-Filing Is Still Mandatory for Most Filers

None of these threshold changes touch the electronic filing mandate. Any business that files 10 or more information returns in aggregate during the calendar year — counting across all form types combined — must e-file rather than submit paper forms. That aggregation rule catches more small and mid-sized businesses than people expect, since it combines 1099s, W-2s, and other information returns rather than counting each form type separately.

E-filing now runs through IRIS, the IRS's newer system that has been replacing the legacy FIRE system. If your business previously filed through FIRE, confirm your IRIS account is set up well before deadlines hit — new-system transitions are a common source of last-minute filing headaches.

What Businesses Should Do Now

  1. Update your accounts payable thresholds in your accounting software from $600 to $2,000 for NEC and MISC reporting.
  2. Revisit vendor onboarding and W-9 collection practices — due diligence still matters even below the new threshold, since you may cross it later in the year.
  3. Recheck payment-app reporting expectations if your business receives income via PayPal, Venmo, or similar platforms; fewer 1099-Ks will be issued going forward.
  4. Confirm your IRIS e-filing setup if you meet the 10-return aggregate threshold.
  5. Talk to your payroll or tax provider about the new tips/overtime reporting boxes.

These changes are meant to reduce paperwork for smaller transactions, but the transition period is exactly when errors happen. Reviewing your 1099 processes before year-end will save time — and possibly penalties — when filing season arrives.

FAQs

Q1: Does the new $2,000 threshold apply to payments made in 2025 or 2026?
It applies to payments made starting January 1, 2026. Payments made during 2025 are still governed by the old $600 threshold.

Q2: If I don't have to issue a 1099 under the new rules, does the contractor still owe taxes on that income?
Yes. The 1099 threshold only affects your filing requirement — it doesn't change the recipient's obligation to report and pay tax on all income they receive.

Q3: Will I still get a Form 1099-K from PayPal or Venmo if I earn over $600 through the app?
Not automatically. Under the reinstated threshold, third-party payment platforms only have to issue a 1099-K once you exceed $20,000 in payments and 200 transactions in a year.

Q4: How many 1099s can I file before I'm required to e-file with the IRS?
Once you file 10 or more information returns total in a calendar year — combining all form types, not just 1099s — e-filing through IRIS becomes mandatory.