The 1099 rules changed for 2026. What to fix before December.

The $600 reporting threshold has been part of business life long enough that most owners treat it as a fact of nature. It moved. The 1099 threshold for 2026 is $2,000, and if you pay contractors, the filings you'll prepare in early 2027 follow a different rule than the ones you filed this past January. The time to adjust your records is now, while the year is still being recorded.

What changed

Under the One Big Beautiful Bill Act, enacted in July 2025, the reporting threshold for Forms 1099-NEC and 1099-MISC rises from $600 to $2,000, effective for payments made in the 2026 tax year. Those are the forms you'll file in early 2027. Backup withholding follows the same threshold, so both sit at $2,000 for 2026 payments. Beginning in 2027, the threshold is indexed for inflation.

The $2,000 figure covers most of the form, not all of it. Gross proceeds paid to an attorney stay at $600, royalties stay at $10, and direct sales stay at $5,000.

Separately, and this one has already happened: the Form 1099-K threshold was restored retroactively to the long-standing $20,000 and 200 transactions test, so the $600 threshold that had been scheduled to phase in never took effect. The 1099-Ks you received this past January were already issued under the restored rule. One thing to be clear about, because it's a common misreading: that minimum applies to payment platforms only. Your card processor reports every dollar you take, with no threshold at all, and that has never changed.

The forms themselves also gained boxes for 2026, for cash tips and for qualified overtime compensation. If you pay contractors in tipped occupations, you want to be capturing that detail now rather than reconstructing it in January.

The House Ways and Means Committee estimated the change would eliminate more than a third of all 1099-MISC paperwork.

What did not change

This is the part worth reading twice, because a threshold change invites the wrong conclusion.

Your deduction doesn't depend on the form. A $1,400 payment to a contractor is still a deductible business expense with or without a 1099. What changes is whether you file an information return, not whether you get to deduct it.

The recipient still owes tax on it. A contractor who receives no 1099 still reports the income. Nothing about the threshold changes that obligation.

Worker classification is untouched. Whether someone is a contractor or an employee turns on the working relationship, on behavioral and financial control and the nature of the arrangement. It has never turned on dollar amounts, and it still doesn't. If you were misclassifying someone at $600, you are misclassifying them at $2,000.

Payments to attorneys and certain other categories keep their own rules, and states set their own filing thresholds, several of which do not follow the federal one. A payment you no longer report federally may still be reportable to a state.

A higher threshold is less paperwork, not less bookkeeping. The payment still has to be recorded correctly either way.

Four things to do before December

1. Collect the W-9s you're missing. This is the whole ballgame, and it is far easier in August than in January. Get a signed Form W-9 from every vendor before you pay them the first time, not after. A vendor who has been paid and has moved on has very little reason to return your call, and without a taxpayer identification number you are exposed to backup withholding obligations and penalties that dwarf the administrative effort. Keep the signed W-9 for as long as you keep the rest of your records — four years past the tax being due, at minimum.

Make it a condition of the first payment. No W-9, no check. It sounds rigid. It is the single most effective control in the entire process.

2. Make sure your file can tell you who crossed the line. Your accounting system needs a vendor flagged as 1099-eligible with a valid TIN, payments coded to the right accounts, and the ability to produce a total by vendor for the calendar year. If your contractor payments are spread across four expense accounts and a couple of them ran through a personal card, no threshold helps you.

3. Check how you paid, not just how much. Payments made by credit card, debit card, or through a third-party settlement network are reported by the processor on Form 1099-K, not by you on a 1099-NEC. Paying the same contractor half by check and half by card means only the check portion counts toward your threshold. Double-reporting is a common and irritating error, and it starts with payment method not being tracked.

4. Confirm entity types. Payments to corporations are generally exempt from 1099-NEC reporting, with attorneys' fees the exception that catches most people. Some payments to a corporation are still reportable, just on a 1099-MISC rather than a 1099-NEC, and medical and health care payments are the common case. The W-9 tells you the entity type, which is another reason to have it on file before the year closes rather than after.

Who this touches most

Contractors and trades. Subcontractor payments are the highest-volume 1099 category in the economy, and the vendors most likely to be paid quickly, informally, and without paperwork. Every subcontractor should have a W-9 and a certificate of insurance on file before the first draw.

Medical and dental practices. Payments for medical and health care services carry their own reporting rules, including for payments to corporations. Locum coverage, contracted therapists, and billing services are worth reviewing specifically rather than assuming the general rule applies.

Professional services firms. Contract designers, developers, writers, and consultants sit right in the band where the new threshold changes the answer, which makes accurate year-to-date totals by vendor more important, not less.

What to do next

Run a vendor payment report for January through today, sorted by total. Look at everyone you've paid more than $1,000 so far this year and check two things: do you have a W-9, and do you know the payment method. Whatever's missing from that list is a January problem you can solve in August instead.

If you'd like the 1099 process built into your monthly close so the year-end filing is a report rather than a scramble, book a free discovery call.

This is general information, not tax advice for your specific situation. Confirm your filing obligations with your tax preparer, particularly on state reporting and worker classification.