For small businesses that are required to issue Form 1099-MISC and 1099-NEC for services, this is a huge change and one we’ve been waiting for. So, here goes:
- Beginning in 2026, the 1099-MISC and 1099-NEC threshold has been increased from $600 to $2,000. This means that, starting with payments made after 12.31.2025, payors are only required to file a Form 1099-MISC or 1099-NEC if the aggregate payments to a payee equal or exceed $2,000.
- The threshold will also be indexed for inflation for the first time ever. For those of you who have been in business for a while, you know that $600 has been the law of the land forever (since the 1950’s, to be exact, and it’s never been indexed for inflation).
- For payments to attorneys, the rules have NOT changed. They’re squirrely, so if you have specific questions there, let us know.
- IMPORTANT – For 2025, the limit is still $600.
Let’s revisit the 1099 rules for a moment, just to make sure you remember them. These are the common cases we see with our clients, not a summary of ALL the requirements.
- For 1099-NEC: You issue this form for services performed by someone who isn’t your employee (including parts and materials) and payments to an attorney for legal services. Those are the common uses of Form 1099-NEC.
- For 1099-MISC: You issue this form for rent paid, prizes and awards, other income payments, gross proceeds paid to an attorney (not for legal services), and a few other specified payments.
The $2k threshold may not seem like a big deal, but it really is. CPAs and small businesses have been asking for an increase in that ancient $600 threshold for so long. As always, we will help you track your 1099 recipients and remind you to get the W9s from your vendors where required.
Please remember that these tax law changes are brand new, and clarification is coming over the next few months. We are providing this guidance based on our understanding of the law as it is written, but the facts could change as we learn more. Please do not make changes to your income or tax position solely based on this blog post, as it is not considered to be tax planning advice. Make sure to consult your tax professional if you have specific questions about your situation.