Article | by Geffen Mesher

New Federal 1099 Thresholds Take Effect in 2026: Is Your Business Prepared?

If your business makes payments to vendors, service providers, or other payees, recent federal tax legislation brings welcome administrative relief. The One Big Beautiful Bill Act (OBBBA), signed into law in 2025, raises the reporting thresholds for two of the most commonly filed information returns: Form 1099-NEC and Form 1099-MISC. Here is what business owners and their accounting teams need to know before the changes take effect.

A Quick Refresher: Who Requires a 1099?

Before diving into the new thresholds, it helps to clarify a common point of confusion. Whether a 1099 is required depends first and foremost on the entity type of the recipient and the nature of the payment to them. As a general rule:

• Sole proprietors, individuals, and single-member LLCs taxed as sole proprietors typically require a 1099 for qualifying payments when payments meet the reporting threshold.
• Partnerships and LLCs taxed as partnerships generally also require a 1099 for qualifying payments.
• C corporations and S corporations are generally exempt from 1099 reporting requirements, with limited exceptions such as payments for legal services or medical and healthcare services.

This means a 1099 may be required for payments to a wide range of service providers — including landlords, attorneys, accountants, IT consultants, marketing firms, cleaning services, and many others — depending on how those businesses are structured. Collecting a Form W-9 from every payee before issuing payment is the most reliable way to determine the correct reporting treatment.

The Old Rules: A $600 Threshold Unchanged Since the 1950s

For decades, businesses have been required to issue Form 1099-NEC when paying a qualifying nonemployee service provider $600 or more in a calendar year. That same $600 threshold applied to Form 1099-MISC, which covers miscellaneous income such as rent payments, prizes, and legal settlements.

That $600 limit has not been meaningfully adjusted since the 1950s. Despite significant inflation and the growing administrative burden it placed on businesses of all sizes, the threshold remained frozen, leaving even small companies filing dozens or hundreds of 1099 forms each year.

What the OBBBA Changes

Under Section 70433 of the OBBBA, the reporting threshold for both Form 1099-NEC and Form 1099-MISC increases to $2,000 beginning with payments made in calendar year 2026 for most payment types. Starting in 2027, that threshold will be adjusted annually for inflation, helping ensure the limit does not become outdated again.

In practical terms, this means:

• 2024 and 2025 payments: The existing $600 threshold still applies. If you make qualifying payments to an eligible recipient totaling $600 or more during these years, a 1099 is still required.
• 2026 payments: A 1099-NEC or 1099-MISC is only required if payments to a single qualifying recipient reach or exceed $2,000 for the year.
• 2027 and beyond: The threshold will be indexed for inflation and will need to be verified each year before the filing season begins.

For example, if you pay a sole proprietor vendor $1,500 for services in 2026, you will not need to issue a 1099-NEC for that payment. However, if that same vendor received $650 from your business in 2025, a 1099-NEC was still due in early 2026 under the current rules.

It is important to remember that even when no 1099 is required, the income remains taxable to the recipient. Businesses should continue tracking all vendor and contractor payments accurately throughout the year regardless of whether a form is ultimately required.

A Critical Filing System Change: FIRE Is Out, IRIS Is In

Separate from the OBBBA threshold changes, businesses that file 1099s electronically need to be aware of a significant shift in how those filings are submitted to the IRS. The IRS’s legacy FIRE (Filing Information Returns Electronically) system will no longer be available for 1099 series filings after the end of 2026, meaning it will not be available for filing 2025 returns. Going forward, all electronic 1099 filings must be submitted through the IRS’s newer IRIS (Information Returns Intake System) platform.

This is not a minor technical update. IRIS requires its own Transmitter Control Code (TCC), which is separate and different from any TCC your business may have previously obtained to file through FIRE. If your business files its own 1099s and has not yet applied for an IRIS TCC, it is important to act soon. The IRS application process can take up to 45 days to complete, and waiting until filing season to address this could leave your business unable to meet its deadlines.

Additionally, the threshold that triggers mandatory electronic filing has changed in a way that will affect more businesses than before. The 10-form threshold for required e-filing is now calculated cumulatively across all information returns, including both 1099 series forms and W-2s combined. Under the old rules, the count was applied separately per form type. Under the new rules, if the total number of W-2s and 1099s your business issues reaches 10 or more in aggregate, electronic filing is required. For many small businesses that previously filed a modest number of forms on paper, this change may mean e-filing is now mandatory.

Taken together, these changes mean businesses should be asking two questions right now:

• Do we have an active IRIS TCC, and if not, have we started the application process?
• When we count all of our W-2s and 1099s together, do we meet or exceed the 10-form threshold that requires electronic filing?

The 1099-K Threshold Change: A Brief Overview

The OBBBA also addresses Form 1099-K, which is issued by third-party payment processors like PayPal, Venmo, and Square. Under the new law, the 1099-K reporting threshold returns to the original $20,000 and 200 transactions, reversing the phased reduction toward a $600 threshold that had been introduced by the American Rescue Plan Act of 2021. While this change primarily affects payment platforms and gig economy workers, businesses that accept or make payments through these channels should be aware of the restored threshold.

What This Means for Your Business

The higher thresholds for 1099-NEC and 1099-MISC will meaningfully reduce the volume of forms many businesses must prepare and file each year. The House Ways and Means Committee estimates that the increased thresholds will eliminate the need for more than one third of all 1099 paperwork nationwide. For small and mid-sized businesses, that translates to real savings in staff time, software costs, and filing fees.

That said, businesses should be careful not to treat this as a reason to loosen their recordkeeping. Entity type determinations still need to be made for every payee, W-9s should be collected and kept current, and starting in 2027 the inflation-adjusted threshold will change from year to year, creating an ongoing need to verify the applicable limit before each filing season.

An Important Caveat: State Conformity Is Not Guaranteed

Here is where the picture becomes more complicated. While the OBBBA raises federal 1099 reporting thresholds, states are not required to conform to these federal changes. States set their own information reporting requirements, and many have historically maintained their own thresholds independent of federal rules.

This means that even if a payment falls below the new $2,000 federal threshold, your business may still be required to issue a 1099 under your state’s rules. For businesses operating across multiple states, this distinction is critically important. Assuming that federal relief automatically extends to your state filing obligations could result in missed filings, penalties, and unnecessary compliance risk.

State conformity decisions are often made gradually and may not be finalized until well into a given tax year. Staying on top of these developments requires active monitoring, which is not always practical for business owners who already have a great deal on their plates.

Now Is the Time to Review Your 1099 Process

The 2026 filing season may feel distant, but preparation now will make for a much smoother transition later. Businesses that take the time to review their vendor and payee records, confirm entity classifications, update their accounting systems, and understand both federal and state requirements will be far better positioned than those who wait until January to sort it out.

At Geffen Mesher, we help businesses navigate exactly these kinds of layered compliance changes. Whether you have questions about how the new thresholds apply to your specific payment relationships, need help assessing your state filing obligations, or want a proactive review of your 1099 processes before year-end, our team is here to help.

Contact us today to speak with one of our advisors about how the OBBBA’s 1099 changes affect your business and what steps you should be taking now to stay compliant at both the federal and state level.

Geffen Mesher’s team is available to assist you with questions related to these updated rules. Please contact professionals for more information at INFO@GMCO.COM.