If you’ve been running your business for more than a few years, you probably have the $600 number burned into your brain. It’s the threshold that triggered a 1099 form. It’s what you’ve been tracking, what your bookkeeper flags, what your accounting software was set to catch. For most small business owners, it became automatic. So when I tell you that number changed on January 1, 2026, the first reaction is usually something between relief and mild panic. Relief because less paperwork. Panic because you’re not entirely sure what you’ve changed, what you haven’t, and whether you’re quietly building a compliance problem for next January’s filing season.

That’s a fair place to be. Here’s what you actually need to know.

What Changed and Why It Matters

The One Big Beautiful Bill Act, signed on July 4, 2025, raised the 1099-NEC and 1099-MISC reporting threshold from $600 to $2,000 for all payments made on or after January 1, 2026. This is the first time this threshold has been updated since 1954. That’s not a typo. The $600 number sat unchanged for over 70 years, which is why the IRS estimates that tens of millions fewer forms will be filed annually under the new rule. The House Ways and Means Committee projects the change will eliminate more than a third of all 1099-MISC paperwork filed every year.

The $2,000 threshold applies to payments to non-employee contractors, freelancers, and vendors paid for services, the same population you’ve always been tracking for 1099 purposes. What changes is the floor. If you paid a freelance designer $1,400 total in 2026, you no longer owe them a 1099-NEC. If you paid that same designer $2,100, you do. The form itself is also being updated. The IRS released early draft redesigns of Forms 1099-NEC and 1099-MISC in mid-2026, adding new boxes to capture tips and overtime compensation under other provisions of the same legislation. So even the forms you’re used to will look a little different when you go to file.

One more thing worth knowing: starting in 2027, the $2,000 threshold will be indexed for inflation automatically, adjusting in $100 increments. That means Congress doesn’t have to act again to keep it current. It also means you’ll want to check the adjusted number each year rather than assuming it stays fixed.

What You Need to Update Right Now

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Here’s what I tell people when they come to me mid-year with this kind of change: the risk isn’t that you don’t know about it. The risk is that your systems still don’t know about it.

Your accounting software almost certainly had a $600 alert trigger built in, and many platforms didn’t automatically update that threshold when the law changed. QuickBooks, for example, has published updated guidance as recently as June 2026 walking users through how to adjust their 1099 vendor tracking settings. If you haven’t gone into your software and manually changed that threshold, you may be generating phantom alerts for payments between $600 and $2,000, which creates unnecessary busywork and the potential for misfilings next January.

The same logic applies to your W-9 collection process. Some business owners use the $600 threshold as the trigger for requesting a W-9 from a new vendor. If your internal policy still says “get a W-9 for anyone you might pay over $600,” you can update that to $2,000, though I’d be careful about loosening this too aggressively. There’s nothing wrong with collecting W-9s early and often. They don’t expire, they don’t cost you anything, and having a vendor’s tax information on file before you need it is always better than chasing it down in December.

The State-Level Wrinkle Most People Are Missing

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Jurisdiction1099 ThresholdNotes
Federal (1099-NEC/MISC)$2,000Effective January 1, 2026; indexed for inflation in $100 increments starting 2027
Massachusetts$600State threshold unchanged
Vermont$600State threshold unchanged
Maryland$600State threshold unchanged
Virginia$600State threshold unchanged
1099-K (Payment Platforms)$20,000 and 200 transactionsSeparate threshold; applies to PayPal, Venmo, Stripe, etc.

This is the part of the conversation where business owners usually go quiet for a second, because it catches a lot of people off guard.

The federal threshold is now $2,000. But several states have not automatically adopted that change. Massachusetts, Vermont, Maryland, and Virginia, as examples, may still require you to file 1099s for payments as low as $600 at the state level. If you have contractors in any of those states, or if your own business is based there and you pay vendors across state lines, you’re potentially operating under two different thresholds simultaneously.

According to guidance from WhippleWood CPAs, this state-level compliance split is one of the most underappreciated complications of the new rule for small businesses. You might correctly determine you don’t owe a federal 1099 for a $1,500 payment and then find out you still owe a state filing. The safest approach right now is to contact your CPA or tax preparer before year-end to confirm which threshold applies in every state where your 1099 obligations might exist. This is genuinely an area where a 30-minute conversation with a professional could save you significant pain in the spring.

The 1099-K Situation Is Separate

You might be wondering whether this change affects the 1099-K forms that platforms like PayPal, Venmo, or Stripe send out. The answer is no, but there’s still news here.

The 1099-K has its own threshold, and it’s been a source of confusion for years given the IRS’s repeated delays and reversals on lowering it to $600. The OBBBA resolved that by resetting the 1099-K threshold to $20,000 and 200 transactions, reversing the previously planned drop to $600. According to OnPay’s April 2026 analysis, this provides meaningful relief for gig workers and small merchants who were bracing for a flood of 1099-K forms for relatively modest side income. If you use payment platforms to receive money from customers, this is the threshold to understand. If you use them to pay contractors, the 1099-NEC rules still govern your filing obligations.

How to Handle the Rest of 2026 Cleanly

We’re at the midpoint of the year, which is actually a good time to run a quick audit. Pull your contractor payments year-to-date. Flag anyone you’ve paid between $600 and $2,000, not because you necessarily owe them a form, but because you want to make sure your records are clean and your software is tracking the right number going forward. If you’re approaching the $2,000 mark with any vendor by mid-year, confirm you have a current W-9 on file now.

Also, keep an eye on the updated 1099-NEC and 1099-MISC form designs. The IRS’s mid-2026 draft redesigns include new boxes tied to other OBBBA provisions, and your payroll or tax software will need to reflect those changes before you file in early 2027. Anchin’s June 2026 guidance flags this as a preparation item for businesses using older or manually managed systems, particularly those not on automatic software updates.

The overall direction here is positive. Less paperwork, a threshold that finally reflects something closer to modern business reality, and a mechanism to keep it updated going forward. But a law changing on paper doesn’t automatically update your workflows, your software, or your state-level obligations. Take an hour now to make sure your systems match what the law actually says. Your January self will be grateful.

Sources

This article is for general informational purposes only and does not constitute financial, tax, or legal advice. Business finance and tax rules vary by entity type, state, and individual circumstances. Consult a qualified CPA, enrolled agent, or business attorney for advice specific to your situation.

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