📣 What Small Businesses Need to Know: New 1099 Thresholds Under the OBBBA

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, includes important changes to the way businesses report certain types of payments on IRS Form 1099. If you work with independent contractors, gig workers, or receive payments through online platforms, these changes may impact your 2025 and 2026 tax reporting.

📊 Summary: What’s Changed?

✅ 1099-K Reporting Threshold Reverted

The OBBBA reinstates the higher threshold for Form 1099-K that existed before 2024.

This means:

• A payment platform (like PayPal, Venmo, Shopify, eBay, etc.) will only issue Form 1099-K if a payee exceeds $20,000 in total payments and has more than 200 transactions in a calendar year.

➡️ This removes the much-lower $600 requirement that had been planned under prior law.

📈 1099-NEC & 1099-MISC: Raised to $2,000

Under the OBBBA, the reporting thresholds for:

• Form 1099-NEC (Nonemployee Compensation), and

• Form 1099-MISC (Miscellaneous Income)

are increasing from $600 to $2,000, starting with payments made after December 31, 2025.

➡️ This applies to payments made in tax year 2026 and beyond — meaning fewer forms for many small businesses.

🧾 What This Means for Small Businesses

✔️ Less Paperwork and Compliance Burden

By raising the thresholds:

• Fewer 1099 forms will need to be issued for small payments.

• Lower-value vendor and contractor payments won’t trigger reporting as often.

• Businesses can reduce administrative time and potential filing errors.

✔️ Still Important to Track All Payments

Even when a 1099 form isn’t required, income is still taxable. Accurate record-keeping remains essential.

📌 Key Dates to Remember

Threshold Change	Takes Effect
1099-K: $20,000 & 200 transactions	Payments made in 2025 and beyond
1099-NEC & 1099-MISC: $2,000	Payments made in 2026 and beyond

📢 Heading Into 2026: How to Prepare

Small businesses and solopreneurs should:

1. Update Accounting Systems – Adjust tracking rules to reflect new thresholds.

2. Educate Vendors & Contractors – Let them know when they might receive a 1099 form.

3. Watch State Reporting Rules – Some states may still use the older $600 threshold.

   
   

   Don't forget to get your vendor or contractor to fill out a W-9!

🧠 Bottom Line

The OBBBA’s changes to 1099 reporting thresholds are good news for many small businesses — reducing paperwork and aligning reporting more with business realities. However, proper tracking and planning are still crucial to avoid surprises at tax time.

If you’d like help navigating these changes, reach out to Virtuous Accounting Services — we’re here to make compliance easier for your business.