The 1099 Threshold Went From $600 to $2,000. Here's What to Change Before January.

The $600 threshold for issuing Forms 1099-NEC and 1099-MISC had been in place since 1954. Seventy-two years of inflation later, it captured a very large number of trivially small payments.

The One Big Beautiful Bill Act raised it to $2,000 for payments made after December 31, 2025. Beginning in 2027, the threshold will be adjusted annually for inflation, rounded to the nearest $100.

What this means and when

For payments made during 2026, you issue a 1099-NEC or 1099-MISC only once total annual payments to a payee reach $2,000. The first forms affected are the ones you file in January 2027.

For payments made in 2025 and earlier, the old $600 threshold still governs. If you're filing or correcting anything for a prior year, use $600.

A concrete example: you paid a subcontractor $1,600 across three jobs in 2026. Under the old rule you would issue a 1099-NEC. Under the new rule you would not.

What did not change

Some payment types keep their own thresholds. Gross proceeds paid to an attorney remain reportable at $600 under a separate code section. Royalty payments remain reportable at $10. Other 1099 forms — INT, DIV, R, B, S — have their own thresholds that were untouched.

The payment is still deductible. A $1,600 payment to a subcontractor is exactly as deductible in 2026 as it was in 2025. The form disappears; the business expense does not.

The recipient still owes tax. A contractor who receives $1,600 and no form still owes income tax and self-employment tax on every dollar. The threshold determines paperwork, not taxability. This is worth stating plainly to any contractor who asks, because the change is being misread in both directions.

You still need W-9s. This is the point most likely to cause trouble.

Why you should keep collecting W-9s from everyone

It's tempting to conclude that you only need a W-9 from vendors you expect to pay $2,000 or more. That reasoning fails for several reasons.

You don't know in January what you'll pay in December. A vendor you expected to use once ends up on four jobs. If you didn't collect a W-9 up front, you're chasing it in January when the vendor is unresponsive or gone.

Backup withholding obligations don't track the reporting threshold in the way people assume. If you don't have a valid taxpayer identification number for a payee and you're required to report, you may be required to withhold at 24%, and the liability for failing to do so falls on you, not the payee.

The W-9 also tells you whether the payee is a corporation — which usually exempts them from 1099-NEC reporting entirely — and whether the entity name matches what you have in your vendor records. Name and TIN mismatches generate IRS notices that cost more time to resolve than collecting the form would have.

The reliable practice is simple: no W-9, no payment. Make it part of vendor onboarding, before the first check goes out.

State rules are a separate question

Federal thresholds do not automatically apply at the state level. Some states have adopted the $2,000 threshold. Others maintain their own requirements, and a few — Massachusetts and Vermont among them — have historically required reporting at lower amounts.

If you pay contractors in multiple states, verify each state's rule rather than assuming federal conformity. Filing federally but missing a state requirement is a common and avoidable error.

Voluntary filing is still allowed

You can issue a 1099 for a payment below the threshold if you want to. Some businesses will continue issuing forms for all contractor payments, for a few reasons: it keeps vendor records clean, it helps contractors document their income, and it avoids the internal complexity of maintaining two different practices.

There's a reasonable argument on both sides. Fewer forms means less work. Consistent forms means fewer judgment calls and a cleaner audit trail. Either approach is defensible; what matters is deciding deliberately rather than discovering in January that nobody knew which rule applied.

What to do before year-end

Update your accounting system's 1099 threshold setting. Most systems have a configurable threshold, and most are still set at $600.

Run a vendor report now showing year-to-date payments and flag anyone approaching $2,000, so you know where you stand before the December rush.

Audit your W-9 file for gaps and close them while vendors are still engaged and reachable.

Confirm which of your vendors are corporations, which are generally exempt, and which are attorneys or landlords with different rules.

This article is general information, not tax advice for your specific situation. State filing requirements vary. Please talk with us before acting on anything here.