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If you own a business, pay independent contractors, or receive payments through platforms like PayPal or Uber, you’ve probably had to deal with 1099 forms. They’re not fun, but they’re a critical part of staying compliant with the IRS.
The good news? The One Big Beautiful Bill Act (OBBBA) has brought some long-awaited relief by changing the thresholds for issuing these forms. Let’s walk through the updates, what they mean for your business, and how to prepare.
📌 A Quick Refresher: What Are 1099 Forms?
📌 A Quick Refresher: What Are 1099 Forms?
Form 1099-NEC: Used to report payments to independent contractors (non-employees). For example, if you hire a freelance graphic designer and pay them $1,000 in a year, you may need to issue them this form.
Form 1099-K: Issued by third-party payment platforms like PayPal, Stripe, Uber, or eBay when payments to an individual meet certain thresholds. This helps the IRS track income that flows through these platforms.
Both forms ensure that income is reported to the IRS and taxed properly.
🚀 Key Change #1: Higher Threshold for 1099-NEC
🚀 Key Change #1: Higher Threshold for 1099-NEC
The old rule: For decades, businesses had to issue a 1099-NEC to contractors paid $600 or more in a calendar year.
The new rule under OBBBA:
Starting in 2026, the threshold increases to $2,000.
From 2027 onward, the threshold will adjust each year for inflation, in $100 increments.
✅ Example:
If you paid a freelance photographer $1,500 in 2026, under the new rule you do not need to issue a 1099-NEC. Under the old rule, you would have.
This is a huge win for small businesses, as it means fewer forms to prepare and file each January.
💳 Key Change #2: Rollback of 1099-K Expansion
💳 Key Change #2: Rollback of 1099-K Expansion
There’s been a lot of confusion around Form 1099-K in recent years. Originally, the threshold for reporting was set to drop drastically (to as low as $600), which would have triggered millions of unnecessary forms.
The new rule under OBBBA:
The 1099-K requirement is only triggered if both conditions are met:
Payments exceed $20,000
AND the recipient has more than 200 transactions
This applies retroactively to 2022, meaning the lower $600 threshold is no longer a concern.
✅ Example:
If you sold 50 items on eBay for a total of $3,000, you won’t get a 1099-K because you don’t meet the $20,000 + 200 transactions rule.
This rollback is a big relief for casual sellers, freelancers, and even small business owners who use platforms like PayPal or Stripe.
🤔 What Does This Mean for You?
🤔 What Does This Mean for You?
Less paperwork: Fewer 1099-NECs to prepare each year.
Simpler compliance: Payment platforms like PayPal will only send 1099-Ks in higher-volume cases.
Same responsibility: Even if you don’t receive a 1099, you must still report all income on your tax return. The IRS still expects accurate reporting.
🔍 FAQs: Common Questions Clients Ask
🔍 FAQs: Common Questions Clients Ask
1. Do I still have to report income if I don’t get a 1099?
👉 Yes! The IRS requires you to report all taxable income, even if no 1099 is issued.
2. What if I pay a contractor $1,800 in 2026?
👉 No 1099-NEC required under the new rule, but you should still keep records for your books and tax return.
3. Does this mean I never have to worry about 1099s again?
👉 Not exactly. If you regularly pay contractors over $2,000, you’ll still need to issue 1099-NECs. And payment platforms will still issue 1099-Ks for higher-volume sellers.
📝 Final Thoughts
📝 Final Thoughts
The OBBBA changes are designed to reduce unnecessary paperwork for small businesses and contractors. But remember: fewer forms don’t mean fewer tax obligations.
Now is the perfect time to:
Review how you pay contractors.
Keep clean, organized records of all payments.
Plan ahead for the 2026 changes so you aren’t caught off guard.
👉 Want to see how these changes will affect your reporting process? Contact us today and let’s make a plan tailored to your business.
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