The $600 Rule Is Dead. Here's What the New 1099 Threshold Means for Your Business.
- Paul Belshaw
- Jul 2
- 4 min read
If you've ever scrambled at year-end to figure out which contractors got paid over $600 — and whether you remembered to get their W-9 on file — you're going to like what just changed.
For tax year 2026, the IRS reporting threshold for Form 1099-NEC and Form 1099-MISC jumped from $600 to $2,000. That means if you paid a contractor, vendor, or freelancer less than $2,000 over the course of the year, you don't have to issue them a 1099.
That's the good news. But there's a catch — and it's an important one. Let's break it all down.
How the New 1099 Threshold Changes Contractor Reporting
The old $600 threshold had been around for decades. For a small business owner paying a handyman, a part-time bookkeeper, or a graphic designer a few hundred bucks here and there, that threshold created a paperwork headache that felt way out of proportion to the dollar amounts involved.
The One Big Beautiful Bill Act (OBBB), signed into law in July 2025, raised the 1099-NEC and 1099-MISC reporting threshold from $600 to $2,000, effective for payments made on or after January 1, 2026. Starting in 2027, that $2,000 threshold will be indexed for inflation each year, so it may rise going forward without requiring any additional legislation.
Backup withholding — the IRS mechanism that kicks in when a vendor's tax ID is missing or incorrect — also now aligns with the $2,000 threshold. Previously it applied at $600. So for smaller payments, that's one less headache to manage.
What This Means in Plain English
Here's a practical way to think about it:
You hire a subcontractor to help with a job in March. You pay them $1,800 total for the year. Under the old rules, you'd need their W-9 on file and a 1099-NEC issued by January 31 of the following year. Under the new rules? You don't have to file anything.
But here's where business owners can trip up: the $2,000 is a per-vendor total for the calendar year, not per payment.If you pay that same person $500 in March, $800 in July, and $900 in October — that's $2,200 total. You're back to filing a 1099.
The threshold is evaluated per contractor, per calendar year. And critically — you don't know upfront how much you'll pay someone over the course of a year, which is why you should still be collecting W-9 forms from every new vendor at the start of the relationship, before you ever cut that first check.
What Didn't Change
A few things that are staying the same — and matter just as much as what changed:
1. You still owe taxes on every dollar you earn.Not receiving a 1099 does not mean income is not taxable. If a contractor receives $1,500 from a client in 2026 and no 1099 is issued, that contractor is still responsible for reporting and paying tax on that income. The 1099 is an informational form for the IRS. Your obligation to report income exists whether or not a form arrives in your mailbox.
2. The 1099-K rules are separate.Form 1099-K — issued by payment processors like PayPal, Venmo, and Stripe — follows different rules entirely. The $2,000 threshold does not apply here. Third-party platforms must issue a 1099-K only when payments exceed $20,000 and at least 200 transactions occurred in the year. So if you get paid through Venmo for business services, don't assume you're off the hook just because this new law passed.
3. Other 1099 forms aren't affected.The $2,000 threshold applies only to 1099-NEC and 1099-MISC. Forms 1099-INT, 1099-DIV, 1099-R, 1099-B, and others maintain their own separate thresholds.
A Word About Florida and State Rules
Federal threshold changes don't automatically apply to state requirements. Some states maintain their own thresholds independent of federal rules. Florida has no state income tax, so for most BATS clients in the Holiday/Pasco County area, this is largely a non-issue. But if you do business across state lines, verify the rules for each state where you have payees.
What Should You Actually Do Right Now?
Here's the practical checklist:
Keep collecting W-9s from every new vendor. You don't know at the start of the year whether you'll cross $2,000 by December.
Track year-to-date payments per vendor in your bookkeeping software. Don't wait until January to do the math.
Review your current contractor list. Some vendors you've been filing 1099s for in past years may now fall below the new threshold.
Talk to your accountant before year-end — especially if your vendor payment patterns have changed this year.
The questions you don't ask matter more than the ones you do. This is a law change that rewards the business owners who stay organized year-round, not just during tax crunch time.
If you're not sure whether your books are set up to track this correctly — or you want to make sure you're not missing any filing obligations — let's talk.
Schedule Your Complimentary Discovery Call at belshawaccounting.com or call us at (727) 916-7410.
Paul Belshaw | Belshaw Accounting Tax and Advisory Services | 3436 US Hwy 19, Holiday, FL 34691
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