The 1099 Threshold Just Changed, and Here’s What Business Owners Need to Know

For decades, the 1099 reporting threshold has been $600. If you paid a contractor, vendor, or service provider $600 or more in a calendar year, you were required to file a 1099. That number hadn’t changed since it was established in 1954.

Under the OBBBA, the threshold for both Forms 1099-MISC and 1099-NEC increased from $600 to $2,000, effective for payments made in 2026.

This is a meaningful change for business owners, but it’s also a change that’s easy to misunderstand. Here’s what actually shifted, what didn’t, and what you should be doing differently.

What Changed

Starting with payments made in the 2026 calendar year, you are not required to file a 1099-NEC or 1099-MISC for a payee unless total payments to that payee reach $2,000 or more during the year. Previously, the threshold was $600.

For businesses that work with a large number of small-dollar contractors (think handymen, freelancers, one-time consultants, event vendors) this eliminates a substantial amount of paperwork. If you paid a photographer $1,500 for a single project, you no longer need to file a 1099 for that payment.

What Didn’t Change

A few important things remain exactly the same:

• The requirement to collect W-9s from vendors and contractors has not changed. You should still be collecting W-9s from any contractor you pay, regardless of amount. The W-9 protects you if amounts later exceed the threshold, and it supports your deduction if the IRS asks.
• The deductibility of the payment has not changed. Payments below $2,000 are still deductible business expenses, you just don’t have to report them on a 1099.
• Worker classification rules have not changed. The IRS still looks at the actual working relationship to determine whether someone is a contractor or an employee. A contractor is not simply someone you pay without payroll taxes.
• The 1099-K threshold for third-party payment processors (PayPal, Venmo, credit card processors) follows a separate set of rules and is not affected by this change.

What Business Owners Should Do Now

Keep collecting W-9s from everyone.

The biggest mistake I see coming is business owners who interpret the higher threshold as “I don’t need to track small payments.” That’s wrong. You still need the W-9 for your records, for your deduction support, and in case total payments to a vendor later exceed $2,000.

Update your accounts payable process.

If you use QuickBooks, Canopy, or any accounting software with 1099 tracking, update the threshold setting. Most platforms will push this update automatically, but verify it before year-end.

Don’t confuse “no 1099” with “no documentation.”

The IRS can still ask about any payment to any vendor. Your ability to support the deduction depends on your documentation, contracts, invoices, proof of payment, W-9 on file. The 1099 threshold change reduces your filing burden, not your documentation responsibility.

Review your worker classification practices.

The higher threshold may tempt some business owners to pay workers just under $2,000 to avoid 1099 filing altogether. This is a mistake. The IRS looks at the substance of the working relationship, not the dollar amount. Misclassification penalties are far more expensive than 1099 compliance.

The Bottom Line

The threshold change is a genuine administrative relief for most small businesses. Fewer 1099s to file means less paperwork and fewer opportunities for filing errors. But the underlying record-keeping and classification discipline shouldn’t change. The businesses that treat this as a reason to relax their documentation practices are the ones who will regret it when the IRS asks questions.

Questions about how the 1099 threshold changes your business? The first call is always on us – contact us here.