Filing tax forms is never fun, but there are some changes coming in 2026 that will make the process easier for businesses who use independent contractors.

 

Businesses that pay independent contractors (non-employees) for services are required to file IRS Form 1099-NEC if total payments exceed a specific threshold. For decades, that threshold has been $600 or more in a calendar year. And if a business fails to file Form 1099-NEC the IRS will access substantial penalties. But that threshold is about to change.

 

Thanks to the One Big Beautiful Bill Act (OBBBA), beginning with payments made in 2026, you will only file if you pay an independent contractor $2,000 or more during the year. Then, beginning in 2027, the threshold will be adjusted annually for inflation in $100 increments. All of this means many businesses will have fewer 1099-NEC filing obligations.

 

Changes to Form 1099-K Thresholds

The OBBBA also revised the filing rules for Form 1099-K, which is used by third-party settlement

organizations (TPSOs) such as PayPal, Uber, and eBay. These platforms are responsible for issuing 1099-Ks when payments meet certain criteria. For example, if you pay a contractor via PayPal, you (the contractor’s client) do not file a 1099-K—PayPal does, if the 1099-K filing threshold is met.

 

Previously, the 1099-K threshold was set to drop to $5,000 in 2025 and then to $600 in 2026—potentially triggering billions of filings. However, the OBBBA reverses that change.

 

Effective retroactively to 2022 (yep, three years ago), TPSOs need to file Form 1099-K if both of the following apply:

  • The recipient is paid more than $20,000.
  • The recipient has more than 200 transactions during the year.

 

This rollback to the 2022 threshold means far fewer Form 1099-K’s will be issued. Both TPSOs and recipients can breathe a sigh of relief.

 

 

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