The 1099 Threshold Is Now $2,000: What Changes for 2026 Payments

For decades, one number shaped how small businesses handled contractor paperwork: $600. Pay an independent contractor that much in a year, and you generally owed them a Form 1099.

That number has changed. For payments made in 2026, the federal reporting threshold for Forms 1099-NEC and 1099-MISC is $2,000 per payee. Here's what that means for your business and what you should still be doing before year-end.

This article is general information, not tax advice. Your CPA can confirm how these rules apply to your specific situation.

What Changed

The change comes from federal legislation passed in 2025, commonly called the One Big Beautiful Bill Act, and the IRS has issued proposed regulations to put it into practice.

• The threshold rose from $600 to $2,000 per payee per calendar year. It applies to payments made on or after January 1, 2026.

• It covers Form 1099-NEC, used for payments to independent contractors for services, and Form 1099-MISC, used for payments like rent and certain other income.

• Starting after 2026, the threshold will be adjusted for inflation, so the number may change slightly from year to year.

• Payments made in 2025 still followed the $600 rule. The first forms filed under the new threshold will be for 2026 payments, filed in early 2027.

What Didn't Change

This is the part that's easy to miss. A higher reporting threshold means fewer forms. It does not mean less recordkeeping.

• Contractors still owe tax on everything they earn. The threshold only decides whether you file a form, not whether the income is taxable.

• Some payment types keep different thresholds. Royalties, for example, still have a much lower reporting threshold. When in doubt, check before assuming a payment falls under the new rule.

• Form 1099-K is a separate set of rules for payments processed through card networks and payment apps.

• State requirements can differ. If you have a state filing obligation, confirm the rules with your CPA.

Why This Still Matters for Your Books

The threshold is calculated per payee across the whole calendar year. A contractor you paid $400 in March, $900 in July, and $800 in October has crossed $2,000, even though no single payment came close.

That's why accurate vendor records matter just as much as before. If contractor payments are scattered across different accounts, categories, or payment methods, it's easy to miscount who crossed the line.

What to Do Before Year-End

October and November are the right time to get ahead of this, not January.

1. Run a year-to-date payments-by-vendor report. See who you've paid and how much, in one place.

2. Identify contractors approaching or above $2,000. Flag them now so nothing is missed.

3. Collect a Form W-9 from every contractor, including those under the threshold. Having taxpayer information on file before you pay someone makes year-end simpler and keeps you ready if a contractor crosses the line later in the year.

4. Check how each vendor is categorized. Make sure contractor payments aren't mixed in with supplies, reimbursements, or other expenses.

5. Loop in your CPA if you have unusual payment types or aren't sure which form applies.

How We Help

Tracking contractor payments is part of the monthly bookkeeping in Mountain Top's Growing Business and Established Business packages, which both include 1099 tracking. Because the tracking happens month by month, year-end reporting becomes a quick check instead of a scramble.

Not sure whether your contractor records are in shape for 2027 filing season? Book a free 30-minute consultation or call (973) 295-6353.