Tax laws shape how businesses pay workers and report payments to the IRS. In recent years, changes to 1099 reporting thresholds have created a little confusion for some business owners and contractors.
What you’ll learn
What you’ll learn
Updated: August 13, 2025
This article is authored by OnPay, a top-rated payroll provider for small businesses with more than 30 years of experience in payroll, taxes, and small business compliance.
Key takeaways
- 1099-MISC and 1099-NEC reporting minimums have increased from $600 to $2,000 (starting with 2026 payments), reducing paperwork required for small scale transactions
- 1099-K requirements have reverted to the original $20,000 and 200+ transactions rule, eliminating the planned $2,500 and $600 reporting levels for 2025 and 2026, respectively
- All income remains taxable regardless of reporting requirements – businesses and contractors must still track and report earnings below these amounts
The passage of the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, has heightened this confusion. Fortunately, OnPay is here to help make sense of things. This article explains what the new law means for 1099 filing, addresses common questions about the updated reporting limits, pinpoints which forms are affected, and highlights pertinent effective dates.
What are 1099 reporting thresholds
A 1099 reporting threshold is the minimum dollar amount that triggers the requirement to file a 1099 form with the IRS. When payments to a person or business reach this limit during a calendar year, the payer must send both the recipient — and the IRS — a 1099 form documenting the payment.
Is all income taxable?
A 1099 form is an informational return designed to inform both the IRS and the recipient that a certain amount was paid. That said, not receiving a 1099 form does not mean the income is not taxable.
All income, including amounts below the 1099 reporting floors, must be included on a federal tax return. For example, if a contractor receives $1,500 from a client in 2026, and the threshold is $2,000, the client does not have to send the contractor a 1099, but he or she is still responsible for reporting and paying tax on that $1,500.
What changed for 1099 reporting under the One Big Beautiful Bill Act
This legislation has changed the 1099 reporting landscape for businesses and payees in two major ways.
First, the law has raised the reporting level for Form 1099-MISC and Form 1099-NEC from $600 to $2,000 (starting with payments made in 2026). This means that beginning with the 2026 tax year, payors will report payments to non-employees only if the total is $2,000 or more in a calendar year. The new threshold will be adjusted for inflation each year, starting in 2027.
Second, for Form 1099-K, the OBBBA has reverted the reporting threshold to its pre-2022 level: $20,000 in total payments and more than 200 transactions. This replaces the previously planned $2,500 and $600 minimum reporting levels for 2025 and 2026, respectively.
These changes will reduce the number of 1099 forms that must be issued for small scale payments. That said, all income remains taxable, even if it’s not reported on a 1099 form.
The One Big Beautiful Bill Act has ushered in the following changes:
- The threshold for 1099-MISC and 1099-NEC has increased from $600 to $2,000 (starting in 2026)
- The threshold for 1099-K has been fixed at $20,000 and 200 transactions (reversing the planned $2,500 and $600 minimum reporting levels for 2025 and 2026, respectively)
- The threshold for backup withholding has been raised to $2,000
Key terms to know
Backup withholding: A required withholding of income tax on certain payments, if the person receiving payment does not provide a correct taxpayer identification number
Third-party organizations: Companies that process payments between buyers and sellers, such as PayPal, Venmo, and credit card processors
Non-employee compensation: Payments made to independent contractors or freelancers for services they provide
Did you know?
The increase for 1099-MISC and 1099-NEC is the first since 1954, updating reporting requirements to match the current economic environment.
Moving on, let’s see how these changes affect 1099s that many employers and those they work with have come to know.
How the new thresholds affect different 1099 forms
The OBBBA affects the reporting requirements for the various 1099 forms in different ways. The table below shows the old and new thresholds for the main forms impacted by the law.
| Form type | Old threshold | New threshold | Effective date |
| 1099-MISC | $600 | $2,000 | Tax year 2026 |
| 1099-NEC | $600 | $2,000 | Tax year 2026 |
| 1099-K | $2,500 for 2025 (never implemented) and $600 for 2026 (never implemented) | $20,000 + 200 transactions | Retroactive to 2022 (for unfiled forms) |
Below is the information each form reports.
Form 1099-MISC: Reports miscellaneous income, such as rent, prizes, awards, and legal settlements
Form 1099-NEC: Reports non-employee compensation for contractors and freelancers
Form 1099-K: Reports payments and third-party network transactions from companies like PayPal, Venmo, and credit card processors
Did you know?
There are other types of 1099 forms, such as 1099-DIV for dividends and 1099-INT for interest, that are not impacted by the OBBBA.
When do these changes take effect?
As outlined below, the timeline for these changes will unfold over the course of several tax years.
2025
The current $600 threshold remains in effect for 1099-MISC and 1099-NEC forms. The 1099-K threshold reverts to $20,000 and 200 transactions.
2026
The new $2,000 reporting threshold begins for both 1099-MISC and 1099-NEC. The 1099-K threshold remains at $20,000 and 200 transactions.
2027 and beyond
The 1099-MISC and 1099-NEC threshold becomes inflation-adjusted, annually. The 1099-K threshold remains at $20,000 and 200 transactions; it is not to be adjusted for inflation.
Understanding the 1099-K threshold changes
Form 1099-K has been on a bit of a rollercoaster ride when it comes to reporting rules. This form reports payments received for goods or services purchased via third-party payment networks, such as Apple Pay, Venmo, and Zelle, and credit card processors.
From 2011 to 2023, the reporting threshold for Form 1099-K was set at $20,000 in payments and more than 200 transactions in a year. In 2021, the American Rescue Plan Act changed these requirements by removing the transaction count and lowering the threshold to $600.
The $600 dollar threshold was scheduled to begin with the 2023 tax year; however, the IRS adjusted its approach. In November 2024, the IRS introduced the following phased approach for the threshold:
- Payments over $5,000 for 2024
- Payments over $2,500 for 2025
- Payments over $600 for 2026 and later
Section 70433 of the One Big Beautiful Bill Act has overruled all this and restored the original reporting threshold for Form 1099-K – $20,000 in payments and more than 200 transactions. Moreover, this change is applied as if it had been part of the American Rescue Plan Act.
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How inflation impacts thresholds over time
Beginning in 2027, inflation indexing automatically increases the 1099-MISC and 1099-NEC reporting threshold each year. The adjustment uses changes in consumer prices, as measured by the government, to update the threshold.
This approach keeps the number from becoming outdated over time. The original $600 limit, set in 1954, remained unchanged for over seventy years. As the value of money decreased due to inflation, the reporting requirement applied to more payments of relatively small economic value.
With annual inflation adjustments, the new threshold is set to be recalculated every year to reflect economic conditions. Uncle Sam will announce updates annually, typically in late fall for the upcoming tax year.
The 1099-K threshold of $20,000 and 200 transactions will not be adjusted for inflation. Unless Congress changes the law, the threshold will remain the same each year.
Moving forward with the new requirements
The 1099 changes enacted by the One Big Beautiful Bill Act should simplify compliance for businesses juggling multiple administrative tasks. Fewer 1099 forms will be required for small payments, freeing up time for companies to focus on core operations.
That said, even with the less stringent reporting requirements, handling 1099 forms and other compensation-related tasks can take a lot of time. Modern payroll and accounting systems can automate your processes and ensure compliance with the ever-changing legislative environment. For businesses looking to streamline their payroll processes, OnPay offers small business solutions with a free 30-day trial.
The OnPay editorial team covers payroll, benefits, and HR-related topics to deliver practical insights for growing businesses.