Form 1099 Thresholds in 2026: The OBBBA Changes to 1099-NEC, 1099-MISC and 1099-K

Two thresholds that CPA firms have applied for years changed in the 2025 reconciliation law, Public Law 119-21, known as the One Big Beautiful Bill Act (OBBBA). Other 1099 thresholds, such as the $10 royalty floor, are not touched by sections 70432 and 70433. The dollar floor for most payments reported on Forms 1099-NEC and 1099-MISC rose from $600 to $2,000. The Form 1099-K floor for third party settlement organizations went back to $20,000 and 200 transactions. This post states what the statute says, where each rule starts, and what to change in your client checklists.

The text below is taken from the enrolled statute, sections 70432 and 70433 of Public Law 119-21, and from the IRS announcement on the 1099-K threshold.

The $2,000 threshold for payments reported under section 6041

Section 70433 of Public Law 119-21 amends Internal Revenue Code section 6041(a) by striking "$600" and inserting "$2,000." The section 6041 reporting rule covers payments of fixed or determinable income made in the course of a trade or business, which is where the Form 1099-NEC and Form 1099-MISC thresholds come from.

The amendments apply to payments made after December 31, 2025. The test is the payment date. A payment made on December 30, 2025 follows the old $600 rule. A payment made on January 2, 2026 follows the $2,000 rule. Accrual-basis clients that book an expense in 2025 and pay it in 2026 apply the new threshold to the cash payment.

The same section changes three related rules:

• Section 6041A. The reporting rule for remuneration for services paid to non-employees, section 6041A(a)(2), previously keyed to payments of "$600 or more." It now keys to the dollar amount in effect for the calendar year under section 6041(a).
• Backup withholding. Section 3406(b)(6) is amended so the backup withholding trigger follows the section 6041(a) amount for the calendar year instead of $600. The heading changes from "Only Where Aggregate for Calendar Year Is $600 or More" to "Only Where in Excess of Threshold."
• Calendar year, not taxable year. The statute replaces "taxable year" with "calendar year" in section 6041(a), so a client with a fiscal year still aggregates payments by calendar year.

Inflation indexing starts after 2026

New section 6041(h) indexes the threshold for "any calendar year after 2026." The $2,000 amount is multiplied by the cost-of-living adjustment under section 1(f)(3), with calendar year 2025 substituted for calendar year 2016 as the base year. Any increase that is not a multiple of $100 is rounded to the nearest multiple of $100.

The threshold is $2,000 for calendar year 2026. For 2027 and later years the amount is increased by the cost-of-living adjustment and any increase is rounded to the nearest $100. Do not hard-code $2,000 into client intake forms, accounting-system rules or engagement templates. Store the threshold by calendar year and update it each year.

Form 1099-K: back to $20,000 and 200 transactions

Section 70432 repeals the lower 1099-K threshold added by the American Rescue Plan Act of 2021. It amends section 6050W(e) so that a third party settlement organization reports a participating payee's third party network transactions only if both conditions hold:

1. the amount that would be reported exceeds $20,000, and
2. the aggregate number of those transactions exceeds 200.

The amendment takes effect as if included in section 9674 of the American Rescue Plan Act, which makes the reversion retroactive. The IRS announced it in IR-2025-107 on October 23, 2025, with FAQs stating that a third party settlement organization does not have to file Form 1099-K for a payee unless the payee's activity exceeds $20,000 and the number of transactions exceeds 200.

Section 70432(b) also applies the de minimis rule to backup withholding. Under new section 3406(b)(8), a payment in settlement of a third party network transaction is a reportable payment only if the payee's transactions for the calendar year exceed both the transaction count and the dollar amount in section 6050W(e). That test does not apply to a payee if any payment made to that payee in the preceding calendar year was reportable. The backup withholding rule applies to calendar years beginning after December 31, 2024.

The two thresholds are not parallel. The 1099-K test requires both a dollar amount and a transaction count, and the statute sets no inflation adjustment for it. The section 6041 threshold is a single dollar test and is indexed.

What changes for client work

Vendor intake. Keep collecting Forms W-9 at onboarding for every non-employee payee. The reporting floor moved, and the backup withholding trigger moved with it, but a payee with a missing taxpayer identification number is still a problem once payments reach the threshold. Collecting the form before the first payment is cheaper than chasing it in January.

Year-end vendor review. Re-run the vendor-spend report with a $2,000 filter for payments made after December 31, 2025. Payees between $600 and $2,000 for 2026 drop off the filing list. Keep the 2025 report on the $600 basis, since 2025 payments follow the old rule.

Accounting-system rules. Vendor 1099 flags and any custom 1099 reports built on a $600 filter need the new amount for 2026 and a recalculation path for 2027. The cleanup steps in accounting-file cleanup before the audit apply to the vendor list: merge duplicates, fill in missing tax identification numbers, and classify payees correctly before the threshold report runs.

1099-K reconciliation. Clients that sell through third party settlement organizations, such as online marketplaces and payment apps, receive a Form 1099-K only above $20,000 and 200 transactions for that platform. Payment card transactions have no threshold under the IRS FAQs, and a platform may also issue a form below the threshold if backup withholding applied or a state sets a lower threshold. The absence of a form is not evidence of no revenue. Reconcile platform deposits to the revenue ledger regardless of whether a form arrives. Revenue recognition audit procedures covers the completeness tests that sit behind that reconciliation.

Engagement letters and checklists. Update the 1099 line in compilation, review and tax-preparation checklists. If your firm assists with 1099 preparation, the engagement letter should state the calendar year of the payments covered and the threshold applied. See the audit engagement letter guide for where such scope statements belong.

A planning table for 2025 versus 2026 payments

Sources

• Public Law 119-21 (One Big Beautiful Bill Act), sections 70432 and 70433, congress.gov
• IRS: IR-2025-107, FAQs on Form 1099-K threshold under the One, Big, Beautiful Bill (October 23, 2025)

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