1099 Season Is Coming. Are Your Records Ready for the New Rules?
Key Takeaways
- For many common business payments made in 2026, the Form 1099 reporting threshold increased from $600 to $2,000.
- The $2,000 threshold is not universal. Different thresholds and rules still apply to certain payments, including royalties, attorney payments, and payments subject to backup withholding.
- The type of payment, recipient, and payment method can all affect whether a Form 1099 is required.
- Businesses should review vendor records before year-end and obtain missing or corrected Forms W-9 now rather than waiting until filing season.
- Form 1099-NEC for 2026 payments is generally due to recipients and the IRS by February 1, 2027.
- Filing incorrect or late information returns can result in penalties, making accurate records and early preparation especially important.
Businesses preparing for 1099 season have an important change to account for this year. For payments made in 2026, the reporting threshold for many common business payments increased from $600 to $2,000.
That means a business that pays an independent contractor $1,500 for services during 2026 generally won’t have the same Form 1099-NEC filing requirement it would have had for that payment in previous years.
But the higher threshold doesn’t apply to every type of payment reported on a Form 1099. And with filing deadlines arriving quickly after year-end, now is a good time to make sure your records are ready.
What’s Changing for 2026?
For payments made before 2026, businesses generally had to issue Form 1099-NEC when they paid a nonemployee $600 or more for services during the year. For payments made in 2026, that threshold increases to $2,000.
The $2,000 threshold also applies to several types of payments generally reported on Form 1099-MISC, including rents, prizes and awards, other income payments, and medical and health care payments.
Beginning after 2026, the $2,000 amount will be adjusted for inflation, so businesses shouldn’t assume this year’s threshold will remain unchanged indefinitely.
The IRS provides a complete breakdown of the different types of payments, reporting thresholds, and applicable forms in its Guide to Information Returns.
Not Every 1099 Threshold Is $2,000
The new threshold isn’t a blanket rule for every Form 1099 payment. For example, royalties generally remain reportable at $10 or more, and special rules apply to certain payments involving attorneys. A business may also have to file Form 1099-NEC or 1099-MISC when federal income tax has been withheld under the backup withholding rules, regardless of the amount paid.
How a payment was made matters, too. Payments made directly by a business may be treated differently from those processed through certain payment cards or third-party networks.
The takeaway is that businesses shouldn’t use $2,000 as the cutoff for reviewing their records. The type of payment, recipient, and payment method can all affect whether a form is required.
Get Your Vendor Records Ready Now
Ideally, businesses should obtain a completed Form W-9 from a new vendor or independent contractor before making payments. The W-9 provides the legal name, business name, federal tax classification, and taxpayer identification number needed to determine and complete information reporting requirements.
Before year-end, review your vendor list for missing or incomplete W-9s, incorrect names or taxpayer identification numbers, and vendors whose total payments may require reporting. It is much easier to track down missing information in November or December than when you’re trying to prepare forms in January.
Know the Deadlines and Penalties
Form 1099-NEC, commonly used to report payments to independent contractors and other nonemployees, generally must be provided to the recipient and filed with the IRS by January 31. Because January 31 falls on a Sunday in 2027, the deadline for reporting 2026 payments moves to February 1, 2027.
Form 1099-MISC follows a different schedule. Recipient statements are generally due by January 31, while forms filed with the IRS are generally due by February 28 if filed on paper or March 31 if filed electronically. When a deadline falls on a weekend or legal holiday, it moves to the next business day.
Missing a deadline can get expensive. For information returns required to be filed in 2027, the penalty can be $60 per return when corrected within 30 days, $130 when corrected later but by August 1, and $340 when filed after that point or not filed at all. The IRS can assess penalties for both failing to file a correct return with the IRS and failing to provide a correct statement to the recipient, and intentional disregard can result in significantly higher penalties.
Use the Change as a Reason to Clean Up Your Records
A new threshold may mean fewer 1099s for some businesses this year, but it doesn’t eliminate the need to prepare. Review your vendor records, request any missing W-9s, and identify the payments that may require reporting so you’re not trying to sort it all out as the deadline approaches.
If you have questions about which payments your business needs to report or want help preparing for 1099 season, contact us. We can help you determine which reporting requirements apply and make sure you’re ready for the upcoming filing season.
