Jim Merritt - July 28, 2025

Updated October 23, 2026, to reflect current IRS reporting requirements.

If your business pays independent contractors, subcontractors, or other qualifying vendors, there's an important change to federal Form 1099 reporting requirements you should know about.

Beginning with payments made in 2026, the general reporting threshold for Form 1099-NEC increases from $600 to $2,000.

This change affects many small businesses that use QuickBooks® Online (QBO) or QuickBooks® Desktop to track contractor payments and prepare year-end tax forms.

Let's look at what changed and how to prepare.

What Changed With the 1099 Reporting Threshold?

The One Big Beautiful Bill Act (OBBBA), enacted in July 2025, increased the federal reporting threshold for certain business payments.

Here's a comparison:

For example, suppose your business pays an independent contractor $1,500 for qualifying services during 2026.

Under the previous $600 threshold, those payments generally would have required Form 1099-NEC reporting.

Under the new $2,000 threshold, a Form 1099-NEC generally wouldn't be required solely because of those payments, assuming no exception applies.

The change also affects certain payments reported on Form 1099-MISC, including qualifying rents and other income payments.

However, not all Form 1099-MISC payment categories follow the same threshold. For example, royalty payments have separate reporting rules.

You can review the details in the IRS Instructions for Forms 1099-MISC and 1099-NEC.

What About Backup Withholding?

The new legislation also changes the minimum payment threshold associated with certain backup-withholding requirements.

However, businesses should not assume that payments below $2,000 are always exempt from backup withholding.

Special rules and exceptions apply, including situations involving missing or incorrect taxpayer identification numbers.

Important: If federal income tax is withheld under applicable backup-withholding rules, a Form 1099 may still be required even when payments are below the normal reporting threshold.

For additional information, refer to the IRS Backup Withholding Guidelines.

What Should QuickBooks® Users Do?

If you use QuickBooks® to prepare contractor 1099s, I recommend reviewing your vendor setup and payment information before year-end.

Here are four important steps.

1. Verify Vendor Information

Make sure applicable contractors have provided a completed Form W-9 containing their correct legal name, address, taxpayer identification number, and federal tax classification.

2. Review 1099 Eligibility

Not every vendor requires Form 1099 reporting.

Vendor classification, the type of service or payment, and applicable exceptions all matter.

For example, payments made by credit card or certain third-party payment networks generally are not reported by the business on Forms 1099-NEC or 1099-MISC because they are handled under separate reporting rules.

3. Check Your General Ledger Mappings

Make sure payments to contractors are recorded to the appropriate G/L accounts.

When preparing 1099s in QuickBooks®, verify that the correct accounts and payment types are included.

Incorrect mappings can result in reportable compensation being omitted.

4. Review the 2026 Reporting Threshold

QuickBooks® Online's 1099 preparation functionality supports the new threshold.

However, don't assume your vendor information, payment classifications, and reporting settings are automatically correct.

Review the results before submitting your forms.

For additional instructions, see Intuit's Guide to Creating and Filing 1099s in QuickBooks® Online.

Does the Higher Threshold Mean Less Bookkeeping?

Absolutely not!

Even if payments to a contractor fall below the applicable 1099 reporting threshold, your business must still maintain accurate accounting records.

You should continue recording contractor expenses, maintaining supporting documentation, and tracking payments consistently.

And remember, not receiving a Form 1099 doesn't automatically mean the recipient's income is exempt from taxation.

The change primarily reduces certain information-reporting requirements. It doesn't eliminate the need for accurate bookkeeping.

Need Help Setting Up QuickBooks® for 1099 Reporting?

Proper vendor setup, G/L account mapping, and payment tracking are essential for accurate 1099 reporting.

QuickTrainer offers Setup Services for QuickBooks® Users and One-on-One Training for QuickBooks Users to help you understand how to configure and maintain your accounting records.

If you're uncertain whether your existing QuickBooks® information is accurate, our Data Review Services for QuickBooks® Users can help identify potential bookkeeping problems.

Your CPA or tax professional should advise you on which payments require reporting and any applicable exceptions.

QuickTrainer is located in Wilmington, NC and works remotely with businesses throughout the United States.

📞 Call QuickTrainer at 910-338-0488

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🌐 Website: www.qti-wilmington.com

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This article provides general bookkeeping information and is not intended as individualized tax or legal advice.

QuickTrainer, Inc. is an independent QuickBooks® consulting and training company and is not affiliated with or employed by Intuit Inc. Intuit and QuickBooks® are trademarks and/or service marks of Intuit Inc.