1099-NEC Reporting Thresholds: $600 to $2,000 Starting in 2026

Beginning with payments made after December 31, 2025, the 1099-NEC reporting threshold changes from $600 to $2,000. Section 70433 of the One Big Beautiful Bill Act (Pub. L. 119-21), signed July 4, 2025, amended 26 U.S.C. § 6041 to raise the long-standing $600 trigger for the first time since it was written into the code.¹ If you pay a non-employee less than $2,000 for services during 2026, you will not need to issue them a Form 1099-NEC. The income remains taxable to the contractor either way.

When the New Threshold Applies

The $2,000 threshold covers payments made on or after January 1, 2026. The first returns affected are those filed in January 2027 for the 2026 calendar year.

For the 2025 tax year, the old $600 threshold is still in force. If you are preparing 1099-NECs due January 31, 2026, use $600. Do not apply the new number retroactively to payments made in 2025.

Section 6041A, which governs reporting for remuneration for services and direct sales, was amended at the same time to reference the dollar amount in Section 6041 rather than carry its own separate $600 figure.² The two provisions now move together.

Automatic Inflation Adjustments After 2026

The old $600 figure sat unchanged for generations. The new $2,000 threshold does not. For calendar years after 2026, the amount adjusts automatically using the cost-of-living formula under Section 1(f)(3) of the Internal Revenue Code, with 2025 as the base year. Any resulting increase rounds to the nearest $100.¹ The first potential bump would apply to the 2027 tax year, and the number will keep drifting upward each year without further legislation.

What Still Counts as Reportable Non-Employee Compensation

The threshold change only shifts the dollar trigger. It does not change what kinds of payments belong on Form 1099-NEC. You still report payments of $2,000 or more (for 2026 forward) made in the course of your trade or business to someone who is not your employee, including:

Fees paid to independent contractors, consultants, accountants, architects, engineers, and similar professionals
Fees paid to attorneys for legal services, including fees paid to incorporated law firms
Commissions paid to non-employee salespersons
Referral and fee-splitting payments between professionals
Travel reimbursements paid to a non-employee outside a formal accountable plan

All of these go in Box 1 of the form. Backup withholding, if any, is reported in Box 4.³

The trade-or-business requirement remains the gatekeeper. Personal payments, such as hiring a painter for your home, do not require a 1099 no matter the amount. Payments to C corporations and S corporations are generally exempt, with legal services being the main exception. Payments to nonresident aliens are reported on Form 1042-S rather than 1099-NEC.⁴ And workers who should be classified as employees still get a W-2; the higher 1099 threshold does not create a new way to avoid that.

Income Below $2,000 Is Still Taxable

This is the point where the change tends to get misread. The $2,000 threshold controls whether the paying business must file a form. It does not control whether the money is taxable to the person who received it.

A freelancer who earns $1,800 from a single client in 2026 will not get a 1099-NEC from that client. That $1,800 is still reportable income on their tax return. The IRS is explicit that all income must be reported whether or not a form arrives in the mail.⁵ Self-employed individuals also owe self-employment tax on their net earnings, covering Social Security and Medicare.

Contractors who have relied on incoming 1099s as an informal bookkeeping system will feel this change most. Fewer forms will be issued overall in 2027. If your records depend on what shows up from clients, start tracking payments independently now. Underreporting because a form never arrived is a common route to an IRS notice.

What Businesses Should Do Before the 2026 Filing Season

Collect W-9s Early

Accurate filing starts before the first payment goes out. Request Form W-9 from every contractor at the start of the engagement. The W-9 captures the contractor’s legal name, address, and Taxpayer Identification Number, either a Social Security Number or an Employer Identification Number.⁶

A contractor who does not provide a TIN triggers backup withholding: you must withhold 24% from each payment, remit it to the IRS, and report the total for the year on Form 945.⁷ Collecting the W-9 up front avoids that scramble.

Verify TINs Before Filing

The IRS TIN Matching service lets authorized payers confirm that a contractor’s name and TIN line up in IRS records before you submit returns. It is available through the IRS e-Services portal, with both single-lookup and bulk options.⁸ Catching a mismatch before filing is much cheaper than fixing it after a penalty notice.

Move to IRIS if You File Electronically

Businesses that file 10 or more information returns of any type combined during the year must file electronically. The count aggregates across form types, including 1099-NEC, 1099-MISC, 1099-INT, and W-2G.⁹

A significant platform change lands right alongside the threshold change. The IRS is retiring the FIRE (Filing Information Returns Electronically) system at the end of December 2026. Starting with filing season 2027, the Information Returns Intake System (IRIS) will be the only electronic filing platform.¹⁰ If you have been filing through FIRE, get set up on IRIS well before January 2027.¹¹

Businesses filing fewer than 10 total returns can still submit paper forms with Form 1096 as a transmittal cover.¹²

Deadlines and Penalties Have Not Changed

Form 1099-NEC is due to both the IRS and the recipient by January 31 of the year following payment.³ For 2026 payments, that is January 31, 2027. There is no automatic extension. A single nonautomatic 30-day extension is available through Form 8809, but you must show a valid reason and submit the request by the original due date.¹³

Penalties for late or missing information returns are tiered. For returns due in 2026:

Up to 30 days late: $60 per return
31 days late through August 1: $130 per return
After August 1 or not filed at all: $340 per return
Intentional disregard: $680 per return, or 10% of the amount that should have been reported, whichever is greater

Each amount applies per form, and the same tiered structure applies separately to the recipient copy that was never furnished.¹⁴¹⁵ The higher threshold means fewer forms are required; it does not soften the consequences of missing one that is.

1
Office of the Law Revision Counsel. 26 USC 6041 – Information at Source
2
Office of the Law Revision Counsel. 26 USC 6041A – Returns Regarding Payments of Remuneration for Services and Direct Sales
3
Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
4
Internal Revenue Service. Reporting Payments to Independent Contractors
5
Internal Revenue Service. Understanding Your Form 1099-K
6
Internal Revenue Service. Instructions for the Requester of Form W-9
7
Internal Revenue Service. Instructions for Form 945
8
Internal Revenue Service. Taxpayer Identification Number (TIN) Matching
9
Internal Revenue Service. Topic No. 801, Who Must File Information Returns Electronically
10
Internal Revenue Service. Filing Information Returns Electronically (FIRE)
11
Internal Revenue Service. Information Returns Intake System (IRIS) Working Group Questions and Answers
12
Internal Revenue Service. About Form 1096, Annual Summary and Transmittal of U.S. Information Returns
13
Internal Revenue Service. Form 8809 – Application for Extension of Time to File Information Returns
14
Internal Revenue Service. Information Return Penalties
15
Internal Revenue Service. Internal Revenue Manual 20.1.7 – Information Return Penalties