The 1099 Threshold Is Now $2,000: What Changed and What Didn’t

For years, the magic number for 1099s was $600. Pay a contractor that much in a year and you owed them, and the IRS, a form. For payments made in 2026, that number is now $2,000. It is good news for your paperwork, but it is easy to read too much into it, so here is what really changed and what still trips people up.

The One Big Beautiful Bill Act raised the reporting floor for the two forms you are most likely to send, and it settled the long-running confusion over a third. Here is the before and after:

Form	Before	Now
1099-NEC (contractors and freelancers)	$600	$2,000 for payments made in 2026
1099-MISC (rent, prizes, legal settlements, and similar)	$600	$2,000 for payments made in 2026
1099-K (payment apps and online marketplaces)	Scheduled to drop to $600	Back to more than $20,000 and more than 200 transactions

Two details are worth knowing. First, the $2,000 figure is indexed to inflation starting with payments made after 2026, so expect it to creep up over time. Second, the change is not retroactive for 1099-NEC and 1099-MISC. The forms you filed earlier this year for 2025 payments followed the old $600 rule. The new number first applies to the forms you will file in early 2027.

A higher threshold means fewer forms to file. It does not mean fewer things to track.

• The deadline. January 31 falls on a Sunday in 2027, so 1099-NEC forms are due to both the contractor and the IRS on Monday, February 1, 2027
• The W-9. You still need a Form W-9 from each contractor to have their legal name and taxpayer ID on file. Getting it before the first payment is far easier than chasing it in January
• Backup withholding. If a contractor will not give you a taxpayer ID, you may be required to withhold 24% of their payments. And if you do withhold, you file a 1099 for that person no matter how small the payment was
• E-filing. If you file 10 or more information returns in total across all form types, you must file them electronically
• Penalties. Late or missing forms were penalized at $60 to $340 per form on returns due in 2026, with higher penalties for intentional disregard, and the amounts are adjusted for inflation every year
• Who counts as a contractor. The threshold does nothing to change whether someone is really a contractor. If you are not sure, our guide to employee vs. contractor classification walks through the tests

Once a person crosses the threshold, you report their full total for the year, starting from the first dollar. Someone you paid $1,900 does not need a form. Someone you paid $2,100 gets a form showing $2,100.

This is the part that is easy to miss. California runs a separate program called Independent Contractor Reporting. If you pay an individual, sole proprietor, or single-member LLC for services, the EDD asks you to file a DE 542 report within 20 days once you pay or contract for $600 or more. At the time of writing, the EDD still lists $600, and a missed report carries a $24 penalty per failure, rising to $490 if the failure is intentional.

The Franchise Tax Board, which handles state copies of 1099 information, lists the $2,000 figure for 2026 in its filing guide. So at least for now, you can find yourself in a spot where no federal 1099 is required but a California report still is. If you run a business in Placerville, El Dorado Hills, or anywhere else in California, check the EDD page before you assume the new threshold lets you off the hook.

It is October, which makes this a good time to get ahead of the February deadline instead of scrambling in January.

• Collect a W-9 from every contractor anyway. Even if someone looks like they will stay under $2,000, a W-9 takes five minutes now and saves a headache if the project grows
• Total up what you have paid each person. Run a vendor report for the year so far and see who is already over, or close to, $2,000
• Remember the payment method. Payments made by credit card or through a payment network like PayPal or Venmo are reported by the processor on a 1099-K, so you leave them off your 1099-NEC. Checks, ACH, and direct bank transfers are on you
• Check your software settings. Make sure your accounting software’s 1099 report reflects the new 2026 threshold, and that the right vendors are flagged as 1099 vendors
• Keep your records. Hold on to W-9s, invoices, and proof of payment. Our guide on how long to keep business records covers the timelines

If you want a deeper look at how 1099s fit into your overall year, our post a practical look at 1099s is a good companion read.

The threshold also changes what lands in your own mailbox. Clients may stop sending you a 1099 for smaller jobs, and payment apps will issue fewer 1099-K forms now that the bar is back to $20,000 and 200 transactions. Fewer forms does not mean less to report. Every dollar of business income is taxable whether or not a form shows up, so keep your own records of what came in. A clean set of books is the only reliable way to make sure your income matches what you eventually file. Our small business tax deduction checklist is a good place to start on the expense side of that picture.