For the first time since 1954, the threshold for filing Form 1099-NEC and Form 1099-MISC is going up. OBBBA § 70433 raises it from $600 to $2,000 per payee per year, effective for payments made on or after January 1, 2026. The threshold will then be inflation-adjusted in $100 increments starting in tax year 2027.
Treasury and the IRS published the implementing proposed regulation, NPRM REG-113229-25, in Internal Revenue Bulletin 2026-19 (May 4, 2026). The public comment period closes June 16, 2026.
This is one of the largest paperwork-reduction changes in OBBBA. For most small businesses, fewer payees will trigger an annual 1099 filing requirement, and fewer year-end W-9 chases will be needed.
What changed
| Element | Before (since 1954) | Under OBBBA (effective Jan 1, 2026) |
|---|---|---|
| Reporting threshold | $600 per payee per year | $2,000 per payee per year |
| Inflation adjustment | None | $100 increments, beginning tax year 2027 |
| Forms affected | 1099-NEC (non-employee compensation), 1099-MISC (rents, prizes, other) | Same forms, higher threshold |
| Filer type | Trade or business making payments to non-corporate payees | Same |
The fundamental reporting framework is unchanged. What changed is the dollar floor.
What did not change
Several adjacent rules look like the new threshold but are governed by separate statutes and have not moved:
- Form 1099-K (third-party payment networks). This threshold is governed by IRC § 6050W and is a separate framework. The new $2,000 NEC/MISC threshold does not apply to 1099-K. OBBBA addressed 1099-K separately under § 70432, which restored the prior $20,000 and 200-transaction reporting framework. Operators relying on PayPal, Square, Stripe, or marketplace platforms should not conflate the two.
- Backup withholding under IRC § 3406, as amended by OBBBA § 70433. OBBBA conformed the backup-withholding threshold to the § 6041 reporting threshold. The practical result: backup-withholding obligations under § 3406 apply only once the new $2,000 reporting threshold is reached and the other backup-withholding conditions (missing or incorrect TIN, IRS B-notice, etc.) are met. The substantive rules around what triggers backup withholding (TIN failures, IRS B-notices) are unchanged; only the dollar floor moved. Collecting Form W-9 at onboarding remains the right BCA practice — not because backup withholding kicks in at any dollar amount, but because it avoids threshold-crossing surprises, prevents TIN-mismatch problems, and removes year-end paperwork chases.
- State 1099 thresholds. Many states have independent reporting thresholds tied to state income-tax administration. These are not preempted by the federal change. State-level 1099 filings may still be required at the old $600 floor or at a state-specific number.
- Anti-discrimination, anti-cash-equivalent, and trade-or-business characterization rules. All preserved.
Why this matters in dollar terms
For a typical small business that pays 8 to 12 contractors a year for one-off services (a graphic designer for a project, a consultant for a single engagement, a tradesperson for one repair), several relationships that previously crossed the $600 line will now sit below the $2,000 line. Each 1099 not required is one fewer W-9 to collect, one fewer year-end filing to prepare, and one fewer surface area for filing-error penalties.
For larger small businesses, the savings are smaller in proportion because most regularly-engaged contractor relationships will still cross the new threshold within a single year. But the cleanup of one-off and small-engagement payees is meaningful.
What to do now
Three things, in order:
- Confirm the change applies to your 2026 payment data. The new threshold is effective for payments made on or after January 1, 2026. A payment made in December 2025 still sits under the $600 rule, even if the contractor is invoiced into 2026.
- Do not stop collecting Form W-9. OBBBA aligned backup-withholding triggers with the new $2,000 threshold, but the operational reasons to collect a W-9 at onboarding are unchanged: a vendor relationship that looks small can grow past the threshold mid-year, a missing TIN drives year-end filing errors and IRS B-notices, and TIN cleanup in November is far more expensive than W-9 collection at onboarding.
- Watch the comment period. NPRM REG-113229-25 is a proposed rule, not a final rule. Comments close June 16, 2026. The final rule may include implementation details (transition rules, electronic-filing thresholds, intersection with 1099-K) that affect 2026 year-end filing. We expect IRS final regulations and Form 1099 instructions for tax year 2026 to be issued before the December 31, 2026 calendar-year close.
When to bring BCA in
Two scenarios where the planning conversation matters:
- You operate a contractor-heavy business (construction, professional services, creative agencies, retail with seasonal labor) and want to clean up your vendor records and W-9 collection process before year-end. The threshold change is a natural opportunity to audit your accounts payable for 1099-eligible relationships and verify TIN data quality.
- You have multi-state operations and want to confirm which state-level 1099 obligations still apply at the old $600 floor. State variance here is real and not always intuitive.
BCA’s role is to advise and assist with business and compliance experience. We can help you map the change against your actual vendor population and identify the specific cleanup work, but the bookkeeping and filings stay yours.
Sources
- One, Big, Beautiful Bill Act, Public Law 119-21 (July 4, 2025), § 70433. https://www.congress.gov/119/plaws/publ21/PLAW-119publ21.pdf
- U.S. Internal Revenue Service. Internal Revenue Bulletin 2026-19, REG-113229-25 — Notice of Proposed Rulemaking on the increase of the information-reporting threshold to $2,000 (May 4, 2026 IRB). https://www.irs.gov/irb/2026-19_IRB
- 26 U.S.C. § 6041 (information at source). https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section6041
- 26 U.S.C. § 6041A (returns regarding payments of remuneration for services and direct sales). https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section6041A
- 26 U.S.C. § 3406 (backup withholding). https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section3406
- U.S. Internal Revenue Service. About Form 1099-NEC. https://www.irs.gov/forms-pubs/about-form-1099-nec
- U.S. Internal Revenue Service. About Form 1099-MISC. https://www.irs.gov/forms-pubs/about-form-1099-misc
Disclaimer
This information is provided for general educational purposes and reflects opinions based on experience. Individual circumstances may vary. The proposed regulation NPRM REG-113229-25 is not yet final, and the final rule may include implementation details that affect tax-year 2026 reporting. State 1099 reporting obligations are independent of the federal threshold and may still apply at the old $600 floor. BCA advisors bring business and compliance experience to help you evaluate the change against your specific vendor population, advise on documentation, and weigh the planning options.