For decades, the $600 threshold has been the standard for issuing 1099 forms. If you paid a contractor or vendor $600 or more in a year, a Form 1099-NEC or 1099-MISC was required.
That is changing.
Under the One Big Beautiful Bill Act (OBBBA), signed into law in 2025, the reporting threshold is increasing significantly, from $600 to $2,000 starting with the 2026 tax year.
This is one of the most notable updates to 1099 reporting rules in decades, and it will impact how businesses track and report payments going forward.
What Exactly Changed?
Beginning with payments made in 2026:
- The 1099-NEC and 1099-MISC reporting threshold increases from $600 to $2,000
- The threshold will be adjusted annually for inflation starting in 2027
In simple terms, businesses will only be required to issue a 1099 if total payments to a contractor or vendor exceed $2,000 during the year.
Why the Change Was Made
The previous $600 threshold had been in place for decades and no longer reflected modern business realities.
The new law aims to:
- Reduce administrative burden on small businesses
- Eliminate reporting on smaller, incidental payments
- Modernize thresholds to better align with inflation and current economic conditions
For many organizations, this means fewer forms to prepare, track, and file each year.
What This Means for Employers
At first glance, this change sounds like a win. And in many ways, it is.
However, there are a few important things employers should keep in mind:
- Fewer 1099s, but not less responsibility Just because a 1099 is not required does not mean the payment is not taxable. Contractors are still responsible for reporting all income, regardless of whether they receive a form.
- Tracking still matters You still need accurate records of all vendor and contractor payments. The threshold only affects reporting requirements, not recordkeeping.
- Systems need to be updated Payroll and accounting systems should be adjusted to reflect the new $2,000 threshold starting in 2026 to avoid over- or under-reporting.
- State rules may differ Some states may continue using lower thresholds, such as $600, which means businesses may still need to file forms at the state level even if federal filing is not required.
A Quick Note on 1099-K Changes
While this article focuses on contractor reporting, it is worth noting that OBBBA also made changes to Form 1099-K (used by payment platforms like Venmo or PayPal).
The law reversed the planned $600 threshold and restored the higher reporting level of $20,000 and 200 transactions, reducing unnecessary reporting for small or casual transactions.
The Bottom Line
The increase from $600 to $2,000 is a meaningful shift that will simplify reporting for many businesses. But it does not eliminate the need for strong processes, accurate tracking, and compliance awareness.
Think of it as fewer forms… not fewer responsibilities.
Stay Ahead of the Changes
As 2026 approaches, now is the time to review your systems, processes, and vendor tracking to ensure you are ready for the new threshold.
At Payroll Partners, we help businesses stay ahead of evolving tax rules with simple, streamlined payroll solutions and dedicated live support. Because when compliance changes, you should not have to figure it out alone.
This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.
