The One Big Beautiful Bill Act (OBBBA) raised the Form 1099-NEC and 1099-MISC reporting threshold from $600 to $2,000, effective for payments made on or after January 1, 2026. The $600 floor had not changed since the 1950s. The 1099s you file in January 2027 will be the first ones governed by the new rules.
What Did the OBBBA Change?
OBBBA Section 70433 amended IRC Section 6041 to raise the minimum reporting threshold. Key details:
- Payments made on or after January 1, 2026 are covered (first 1099s due January 2027)
- The threshold inflation-adjusts annually starting with 2027 payments, using 2025 as the base year, rounded to the nearest $100
- Both Form 1099-NEC (nonemployee compensation) and Form 1099-MISC (rents, royalties, miscellaneous income) are affected
- Form 1099-K is not part of this change: OBBBA separately restored the 1099-K threshold to $20,000 and 200 transactions
What Did Not Change?
The threshold change affects filing obligations, not the underlying tax law.
- W-9 collection. There is no IRS rule tying W-9 collection to a dollar threshold. Collecting a W-9 from every vendor at the start of the engagement remains best practice. Backup withholding at 24% applies when a contractor has no valid TIN, regardless of payment amount.
- Contractor income reporting. Contractors and freelancers must report every dollar of business income on their return, whether or not a 1099 is issued. The form is informational; the income is taxable either way.
- Your business deduction. You can still deduct legitimate contractor payments whether or not you issue a 1099.
Old Rules vs. New Rules
State Conformity Is Not Universal
Not every state automatically follows the federal increase.
- California and Colorado have adopted the $2,000 threshold for 2026 1099-NEC and 1099-MISC reporting
- Mississippi and Wisconsin remain at the $600 threshold until their legislatures act
- States with rolling federal conformity will also pick up the annual inflation adjustments; states that codified $2,000 as a static number will diverge from the federal threshold again within a few years
If you operate across multiple states, verify each state's information reporting rules separately before filing.
What to Do Now
- Update your accounting software. Set the 1099 trigger to $2,000 for the 2026 calendar year.
- Keep collecting W-9s. The threshold change does not reduce your vendor onboarding obligations.
- Communicate to contractors. They remain responsible for reporting all income, even without a 1099.
- Check your state. If your state has not conformed, you may still owe state 1099s at the $600 threshold.
The higher threshold reduces paperwork for businesses that use occasional contractors for small jobs. It does not reduce the tax owed on either side of the transaction.
Have questions about 1099 filing, contractor classification, or other small business tax requirements? Contact TS CPA for a free consultation. We respond within the same day.