Last updated: September 26, 2026 · By the Flex Tax and Consulting Group team
Starting with payments made in 2026, businesses generally no longer have to issue a Form 1099-NEC or 1099-MISC to a contractor or vendor they paid less than $2,000 during the year. The threshold had been $600 for decades. The change comes from the 2025 federal tax law, and the first forms affected are the ones due in early 2027. Here is what changed, what stayed the same, and why California businesses still need to track payments of $600 or more.
Key takeaways
- The federal 1099-NEC and 1099-MISC reporting threshold is $2,000 for payments made in 2026, up from $600. It may be adjusted for inflation starting in 2027.
- Royalties still use the $10 threshold, and the $5,000 direct-sales box is unchanged.
- Backup withholding now follows the same $2,000 threshold.
- Form 1099-K from payment apps and marketplaces is back to over $20,000 and over 200 transactions.
- California’s EDD still requires reporting independent contractors you pay $600 or more (Form DE 542).
- A higher reporting threshold does not change what is taxable. All income must still be reported by the person who receives it.
What changed for 1099-NEC and 1099-MISC
For tax years beginning after 2025, the minimum amount that triggers many information returns rose to $2,000. According to the IRS instructions for Forms 1099-MISC and 1099-NEC, the threshold is now $2,000, and it may be adjusted for inflation beginning in calendar year 2027.
| Payment type | Form | Paid in 2025 | Paid in 2026 |
|---|---|---|---|
| Nonemployee compensation (contractors, freelancers) | 1099-NEC, box 1a | $600 | $2,000 |
| Rents, other income, medical and health care payments | 1099-MISC | $600 | $2,000 |
| Royalties | 1099-MISC | $10 | $10 (unchanged) |
| Direct sales of consumer products for resale | 1099-NEC or 1099-MISC | $5,000 | $5,000 (unchanged) |
| Payment apps and online marketplaces | 1099-K | Over $20,000 and over 200 transactions | Same |
The 2026 forms also add new boxes for cash tips and overtime amounts, which support the new tips and overtime deductions.
What did not change
- Taxability. The IRS stresses that reporting thresholds don’t affect whether income is taxable. A contractor paid $1,500 must still report that $1,500 as income, even if no 1099 arrives.
- Your own records. Keep invoices, W-9s and payment records for every vendor, whatever the amount. They support your deductions if you’re examined.
- Payment card transactions. Card payments processed through a merchant account are still reportable on Form 1099-K with no minimum.
- Deadlines. Form 1099-NEC is due January 31. For 2026 payments, January 31, 2027 is a Sunday, so the deadline moves to Monday, February 1, 2027.
California: the $600 rule still applies at the EDD
Many California business owners will miss this. California’s Employment Development Department still requires a Form DE 542 within 20 days when you pay an independent contractor $600 or more in a calendar year, or sign a contract for $600 or more. That rule is state law and didn’t change with the federal threshold.
In practice, a Bay Area business may no longer owe a federal 1099-NEC for a $1,200 contractor, but may still owe the EDD a DE 542 for the same person. Tracking every contractor paid $600 or more remains the safest habit.
What to do before year-end
- Collect a Form W-9 before the first payment to every contractor and vendor, not in January.
- Run a vendor payment report now and flag anyone at or near $2,000 for 2026.
- Separate card and payment-app payments from checks, ACH and wires. Card and app payments are reported by the processor on Form 1099-K, not by you on a 1099-NEC.
- Check your California DE 542 reporting for contractors paid $600 or more.
- Update your accounting software settings so 1099 reports use the 2026 thresholds.
If you’re also reviewing entity structure or retirement contributions this fall, see our 2026 Year-End Tax Planning Checklist and Solo 401(k): Sole Proprietor vs. S-Corp.
FAQ
What is the 1099 threshold for 2026?
For payments made in 2026, Form 1099-NEC and most Form 1099-MISC boxes use a $2,000 threshold, up from $600. Royalties still use $10.
Do I still need a 1099 for a contractor I paid $1,000 in 2026?
Generally no federal 1099-NEC is required below $2,000. In California, you may still need to report the contractor to the EDD on Form DE 542 if you paid $600 or more.
If I don’t get a 1099, is the income still taxable?
Yes. All income is taxable and must be reported on your return, whether or not you receive a 1099.
What is the 1099-K threshold for 2026?
Payment apps and marketplaces issue Form 1099-K when payments to you exceed $20,000 and you have more than 200 transactions. Card payments through a merchant account have no minimum.
When are 2026 Forms 1099-NEC due?
February 1, 2027, because January 31, 2027 falls on a Sunday.
Related reading
- 2026 Year-End Tax Planning Checklist for High Earners, Business Owners & Investors
- Solo 401(k): Sole Proprietor vs. S-Corp
- Case Study: Does an S-Corp Actually Save Taxes If You Have a Full-Time Job?
Sources
Last reviewed September 26, 2026.
- IRS: Instructions for Forms 1099-MISC and 1099-NEC (Rev. December 2026)
- IRS: Form 1099-K FAQs for third-party filers
- IRS: Proposed regulations on backup withholding thresholds
- California EDD: Independent Contractor Reporting (DE 542)
Not sure which vendors need a 1099 for 2026?
This article provides general information only and is not tax or legal advice. Tax outcomes depend on individual facts and circumstances. Contact us about your specific situation.