“Simple can be harder than complex.” — Steve Jobs
Quick Summary: What’s Changing With The 2026 1099 NEC Threshold?
- Businesses will only be required to file a 1099-NEC if they pay an independent contractor $2,000 or more in a calendar year.
- The new rule begins for tax year 2026.
- Business owners: less paperwork, but you still need to keep solid records and collect W-9s.
- Contractors/freelancers: you still need to track and report all income, even if no 1099 shows up in your mailbox.
If you’ve ever hired a freelancer for your business (or worked as one yourself), you know the drill: at the end of January, your clients send you a Form 1099-NEC if payments hit $600+.
That threshold is actually about to jump. Which means the rare gift of less paperwork for you, the business owner.
But if you’re an independent worker, pay attention. Because your responsibility to track and report all your income doesn’t shrink with the number of 1099s you receive.
What’s the new 1099 NEC threshold?
BEFORE: You had to issue a 1099-NEC for any contractors or freelancers you paid $600 or more in a year.
NOW: Starting in 2026, the reporting requirement only kicks in once payments reach $2,000 in a calendar year.
That’s more than triple the previous amount. This will help streamline your reporting, especially if you contract out for various jobs below the $2000 mark.
What does the new 1099 NEC threshold mean for me as a business owner?
You have fewer forms to prepare in January. Which means more time back for your team (and less stress for you).
But even if you don’t have to issue a 1099 for a payment under $2,000, keep accurate records.
Track your spending so you can make informed business decisions. Properly document your expenses for potential tax deductions. These practices will also help create an audit trail, should the IRS ever request proof of your business expenses.
Make collecting a W-9 a standard part of your onboarding process for any new contractor, no matter the project size. This guarantees your vendor records are complete from the start and saves you from scrambling for information if a payment crosses the $2,000 line.
What does the new 1099 NEC threshold mean for me as an independent contractor?
You still have to report all income, whether you receive a 1099-NEC or not.
So, make sure to track your income and expenses. Apps, spreadsheets, accounting software… pick a method and stick to it. Don’t wait until April to piece it all together.
And self-employment tax still applies. Beyond income tax, you’re responsible for both halves of Social Security and Medicare on your net earnings.
FAQ
“Does the new 1099 NEC threshold mean I won’t have to report income under $2,000?”
No. All income is taxable and should be included in your financial records, regardless of whether a 1099-NEC is issued. The $2,000 threshold only affects whether the payer has to send the form.
“Do I need a W-9 if I’m only paying an independent worker a small amount?”
Yes. Always collect W-9s before you pay someone. It’s best practice for your records, and it protects you if totals shift later.
“Do payments through PayPal or Venmo count toward the 1099 NEC threshold?”
Generally, no. The payment company is the one that reports it on a 1099-K (if thresholds of $20,000 in payments and 200 transactions are met). But still keep your own records either way.
“When does the new $2,000 1099 NEC threshold start?”
It applies to payments made after December 31, 2025 (so forms due January 2027). The 2025 forms you issue in January 2026 will still use the old $600 rule.
“What if one of my clients pays me $1,500 and doesn’t send a 1099? What do I do?”
You still report that $1,500 as income as part of your overall business earnings. The IRS expects you to report all earnings, even without a form. This is a core reason why solid bookkeeping is so vital.
“Do I have to pay self-employment tax on my 1099 income?”
Yes, independent workers still cover their own Social Security and Medicare contributions through self-employment tax. It’s something you’ll want to plan and budget for since no employer is sharing that cost with you.
Ultimately, this update means less paperwork for businesses and a bit less form-chasing for contractors. But the fundamentals don’t change: every dollar earned is still reportable. And clean records are still the foundation of smart financial management.
If you’re a business owner, this is a great time to revisit how you manage vendor payments and recordkeeping. And if you’re a freelancer, it’s a reminder that you are the final backstop for tracking and reporting your income.
Either way, I can help you make sure you’re set up to take advantage of this simpler system without missing any important details:
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