Filing tax forms is never fun—but staying ahead of changes can reduce your reporting burden and help you avoid unnecessary penalties.
If your business pays independent contractors (non-employees) for services, you’re likely familiar with IRS Form 1099-NEC. For decades, the rule has been simple: if you pay an independent contractor $600 or more in a calendar year, you must file a Form 1099-NEC. Failure to do so can result in substantial penalties.
That threshold is about to change.
New 1099-NEC Threshold
Thanks to the One Big Beautiful Bill Act (OBBBA), beginning with payments made in 2026, you’ll only need to file Form 1099-NEC if you pay an independent contractor $2,000 or more during the year.
Even better, starting in 2027, the threshold will be indexed for inflation in $100 increments.
This update means many businesses will have fewer 1099-NEC filing obligations—a welcome simplification for small business owners and bookkeepers.
Changes to Form 1099-K Thresholds
The OBBBA also tackled the much-debated Form 1099-K, which is filed by third-party settlement organizations (TPSOs) such as PayPal, Venmo, Uber, Lyft, and eBay. These platforms—not the business or payer—are responsible for issuing 1099-K forms when payments meet specific criteria.
Here’s how the rules shake out:
- Old law: The 1099-K threshold was scheduled to drop to $5,000 in 2025 and then $600 in 2026—potentially triggering billions of new filings.
- New law under OBBBA: Effective retroactively to 2022, TPSOs must issue a Form 1099-K only if both:
- The recipient receives more than $20,000, and
- The recipient has more than 200 transactions during the year.
This rollback to the 2022 thresholds is a huge relief for both platforms and taxpayers, who would have otherwise faced a flood of 1099-Ks for relatively small transactions.
A Final Reminder
Even with these new thresholds, it’s critical to remember:
- All taxable income must be reported—whether or not you receive a 1099 form.
- Just because a form isn’t issued doesn’t mean the IRS doesn’t expect you to include the income on your tax return.
IRS Penalties
The IRS takes information reporting seriously. The penalty for failing to file a 1099 is currently $310 per form. And remember:
- You must file two forms for each vendor—one sent to the vendor and one to the IRS.
- That means the real penalty could be $620 per contractor.
Avoiding penalties starts with staying compliant, and the OBBBA’s changes should make that task a little easier.
