Jim Merritt - 07/28/2025

The Premise:

• For tax years through 2025, the filing threshold remains $600: you must issue a 1099‑NEC (or 1099‑MISC, as applicable) if you've paid $600 or more to a nonemployee contractor, vendor, or attorney in the course of business
• Effective tax year 2026 (i.e., for forms issued in early 2027), the threshold increases to $2,000, and it will be indexed for inflation in subsequent years.

Why the Change?

• The increase stems from the One Big Beautiful Bill Act (OBBBA) passed in mid-2025, which adjusted thresholds for various 1099 forms.
• Along with the 1099‑NEC and 1099‑MISC thresholds rising to $2,000, backup‑withholding requirements also shift to the same level and then adjust annually for inflation.

Quick Summary

Form Current Threshold (through 2025) Threshold Starting Tax Year 2026 (form filed in 2027)

1099 NEC $600 $2,000 (inflation-indexed from 2027 onward)

1099 MISC $600 $2,000 (inflation-indexed from 2027 onward)

What You Should Know

• No change applies yet: for the 2025 tax year, you still adhere to the $600 rule.
• Starting tax year 2026, you'll only need to issue a 1099‑NEC/MISC when payments are $2,000 or more.
• Backup withholding thresholds for missing TINs or invalid W-9 forms also rise to $2,000 in 2026 and become inflation-adjusted thereafter
• Regardless of form issuance, all income must be reported when required — lack of a form doesn't exempt taxable income.

Why It Matters

• This change helps reduce paperwork for small businesses and casual transactions.
• But if you regularly pay contractors between $600 and $2,000, you’ll need to adjust your record-keeping practices starting in 2026 (although, if you use QuickBooks, this new threshold with automatically adjust).
• The new inflation indexing means the $2,000 threshold may be higher in future years.

Need help setting up QuickBooks for 1099s? QuickTrainer can help! Reach out to us by calling us at 910-338-0488 or Email Us. We are here to help you!