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The 1099-NEC and 1099-MISC reporting threshold jumped from $600 to $2,000 for payments made on or after January 1, 2026. If your business pays contractors, freelancers, or vendors, that is the number your bookkeeping needs to track from now on, not the $600 figure most tracking spreadsheets and accounting-software defaults still use. The change only affects when a 1099 form is required, not whether the income is taxable. Here is what changed, what did not, and the specific update to make to your tracking setup before year-end.
What changed, and when does it take effect?
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, raised the information-reporting threshold for Form 1099-NEC and Form 1099-MISC from $600 to $2,000. Section 70433 of the act amended Internal Revenue Code §6041(a) and §6041A(a)(2), and the new threshold applies to payments made after December 31, 2025. In practice, that means the 2026 calendar year, for forms businesses file starting in early 2027.
The old $600 threshold had not moved since 1954, so this is the first significant adjustment in over seventy years. Starting in 2027, the $2,000 figure itself gets indexed for inflation and rounded to the nearest $100, so expect it to creep upward in future years rather than stay fixed.
| Before January 1, 2026 | From January 1, 2026 | |
|---|---|---|
| 1099-NEC / 1099-MISC threshold | $600 | $2,000 |
| Last changed | 1954 | Indexed for inflation starting 2027 |
| Applies to | Nonemployee compensation, misc. payments | Same forms; 1099-K is a separate rule, see below |
Do not confuse this with Form 1099-K, which covers payment-card and third-party network transactions (think PayPal, Stripe, or a marketplace payout). The same law reset the 1099-K threshold back to $20,000 and 200 transactions, reversing the lower phase-in that had been scheduled. If you pay contractors by direct deposit, check, or ACH, the $2,000 1099-NEC/MISC threshold is the one that applies to you, not the 1099-K figure.
What did not change?
The threshold change is a reporting rule, not a tax rule. A contractor who earns $1,200 from you in 2026 will not get a 1099-NEC, but that $1,200 is still taxable income they are required to report on their own return. Nothing about what counts as income changed. If you are the one receiving payments below the new threshold, do not treat a missing 1099 as permission to skip reporting it — the IRS has other ways to see the money, and the obligation exists independent of any form.
Who does this actually affect?
This matters most if you run a freelance business, a small agency, or any operation that pays other people or businesses for services — the payer side of the 1099 relationship, not the recipient side. If you hire contractors, freelance help, or unincorporated vendors and pay them outside of payroll, you are the one responsible for tracking payments and issuing the form when a contractor crosses the threshold for the year.
The threshold applies the same way regardless of your own business structure: sole proprietor, LLC, or corporation, you track payments to vendors the same way. What has not changed is who you owe a 1099 to in the first place: payments to most corporations still do not require a 1099-NEC, a carve-out that predates this year’s change and was not affected by it. The one exception is attorneys. Legal fees get a 1099-NEC even when the law firm is incorporated, and the new $2,000 threshold applies to that carve-out too. If your contractor list is mostly individuals and unincorporated freelancers, this distinction will not come up often, but it is worth knowing before you assume every vendor above $2,000 needs a form.
Should you still collect a W-9 from every contractor?
Yes, and this is worth doing even though it feels like extra paperwork for a $300 project. In January you usually cannot know whether total payments to a given contractor will cross $2,000 by December. A one-off job can turn into a recurring relationship. Collecting a W-9 before the first payment, regardless of amount, means you are never scrambling for a tax ID number in the last week of December when a contractor stops responding to email.
How do you update your contractor-tracking spreadsheet?
If you are tracking contractor payments in a spreadsheet, the fix is a formula change, not a rebuild. Set up three columns: vendor name, payment date, and amount, with one row per payment, then add a running-total column that flags any vendor whose year-to-date total crosses $2,000. In Google Sheets or Excel, that is a single formula:
=IF(SUMIF($A$2:$A2,A2,$C$2:$C2)>=2000,"1099 required","below threshold")Paste that into a status column next to each row, filling it down as you add payments. SUMIF adds up every payment to that vendor from the top of the sheet through the current row, so the flag updates itself as the year goes on instead of requiring a manual recount in December. If your current sheet already has this formula built around $600, this is the only change to make: replace the number, not the structure.
Can you automate the threshold check instead of watching it manually?
A spreadsheet formula still requires someone to open the file and look. If you would rather get a notification the moment a contractor crosses $2,000, a simple automation on top of the same sheet handles that: trigger on a new or updated row in your Google Sheet, filter for rows where the running-total column now reads “1099 required,” and send yourself an email or a message when that happens. Zapier can run this exact chain, and a check like this (one trigger, one filter, one notification) comfortably fits inside its free tier, which includes 100 tasks a month with unlimited two-step workflows; you would only need a paid plan if you also wanted multi-step logic or premium app connections layered onto it.
What about your bookkeeping software?
If you already run contractor payments through accounting software (QuickBooks Online, Wave, FreshBooks, or something similar), check its vendor or contractor settings for a 1099 threshold field before assuming it updated itself. Software vendors do not all ship threshold changes on the same timeline, and a setting that defaulted to $600 (or was left blank) will keep flagging vendors incorrectly until you fix it by hand. Look specifically in the section where you mark someone as “1099 eligible” or manage contractor payments, not in general tax settings, since that is usually where the number lives.
Pairing that check with a receipt-scanning habit keeps your side of the paper trail intact no matter what a vendor’s software decides to do: see the receipt-scanning workflow guide for a phone-to-folder setup that works alongside whatever tracking method you use here.
The filing deadline itself did not move either. Once you know a contractor crossed $2,000 for the year, the 1099-NEC is due to the contractor and to the IRS by January 31 of the following year, the same deadline that applied under the old $600 threshold. That is one more reason the spreadsheet or automation update above is worth doing now rather than in January. You want the threshold check running correctly for the whole year, not scrambled together the week before forms are due.
What if you are not sure a past payment crosses the threshold?
- Pull every payment made to that vendor since January 1, 2026, regardless of how many separate transactions it took.
- Add them up for the full calendar year — the threshold is a per-vendor annual total, not a per-payment or per-invoice limit.
- If the total is at or above $2,000, issue the 1099-NEC or 1099-MISC as usual.
- If you are close to the line or genuinely unsure, issuing the form anyway carries no penalty for over-reporting — the risk sits entirely on the side of not sending one when you should have.
- Keep your underlying records (invoices, bank transfers, the W-9 you collected) regardless of which side of the threshold a vendor lands on.
Evidence and verification
Threshold change and effective date: One Big Beautiful Bill Act, Section 70433, amending IRC §6041(a) and §6041A(a)(2); analysis via Groom Law Group and Sovos, accessed 2026-08-31.
Signing date and legislative context: CPA Practice Advisor and Avalara coverage of the One Big Beautiful Bill Act, accessed 2026-08-31.
1099-K threshold reset to $20,000 / 200 transactions: same legislative coverage, accessed 2026-08-31.
Zapier free-tier task allowance: aml.tools catalog, last verified 2026-08-22.
Corporate exemption, attorney carve-out, and the January 31 filing deadline: IRS Instructions for Forms 1099-MISC and 1099-NEC (Rev. December 2026), irs.gov/instructions/i1099mec, accessed 2026-08-31.
This is a desk-researched compliance explainer, not tax advice specific to your situation — when a payment total is genuinely ambiguous, a tax professional or the IRS’s own guidance is the tie-breaker, not this article.
Where this leaves you
None of this changes how much tax anyone owes. It changes one configuration detail (the number your tracking method compares contractor totals against), and that is a five-minute fix in a spreadsheet formula, an automation filter, or a software setting. Make the update once, before year-end, and the rest of your contractor bookkeeping keeps working the way it already does. If you have not yet automated the estimated-tax side of running a freelance business, the quarterly estimated tax automation guide is the natural next stop — the 1099 you do or do not receive has no bearing on what you owe there either.
Federal BOI reporting is a separate compliance question from contractor tax forms. The FinCEN BOI reminder guide helps you check an entity’s formation before removing obsolete tasks.