Businesses and nonprofit organizations that pay independent contractors will be making an adjustment in the 1099 filing procedures. A federal tax law enacted in 2025 raises the reporting threshold for many payments from $600 to $2,000. The change applies to payments made during calendar year 2026, which generally will be reported in early 2027. Payments made in 2025 remain subject to the earlier rules.
The new threshold for contractor payments
For 2026 payments, an organization must issue Form 1099-NEC when it pays a nonemployee $2,000 or more during the year for services performed in the course of its operations. This can include payments to consultants, designers, writers and other independent contractors. The $2,000 threshold replaces the $600 threshold that applied to payments made before 2026. Beginning in 2027, the threshold may be adjusted for inflation.
The higher threshold does not change how a worker is classified. Nonprofit organizations must still determine whether a person is an employee or an independent contractor and use the appropriate tax form.
Does $2,000 apply to every Form 1099?
No. “Form 1099” refers to a family of information returns, each with its own reporting rules. Form 1099-MISC, for example, covers certain payments such as rent and other income, but its thresholds vary by payment type. The IRS’s 2026 guidance lists a $10 threshold for royalties and a $600 threshold for certain gross proceeds paid to attorneys. Organizations should review the specific payment and form before assuming the new $2,000 amount applies.
Form 1099-K has a separate rule. Payment apps and online marketplaces generally must issue that form for payments for goods or services when both the payment total exceeds $20,000 and the number of transactions exceeds 200. Payment card processors have different reporting requirements and may issue a Form 1099-K regardless of the amount. The Form 1099-K threshold should not be confused with the new contractor payment threshold.
Revisions in the filing process
The higher threshold may reduce the number of Forms 1099-NEC an organization files, but it doesn’t affect the obligation to file and the necessity of recordkeeping. Tracking payments to each contractor throughout the year and requesting a completed Form W-9 when establishing the relationship remains a requirement. A missing or incorrect taxpayer identification number can trigger backup withholding requirements, even when a payment is below the usual filing threshold.
Now is a good time to review vendor payment records and confirm which 2026 payments will meet the new $2,000 threshold.
