“Simple can be harder than complex.” — Steve Jobs

Quick Summary: What’s Changing With The 2026 1099 NEC Threshold?

• Businesses will only need to issue 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 owe tax on 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 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 tax responsibility 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 reporting for a lot of small businesses.

But… as a general rule, you don’t need to issue a 1099-NEC to a corporation, including an LLC that has elected to be treated as an S or C corporation. This includes professional service providers (like an IT consulting firm, for example) or specialized contractors who choose to form an LLC.

 

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 for budgeting and expense deductions. Also, in case the IRS requests proof of all business expenses during an audit. Unverified expenses can be disallowed, which can lead to a higher tax bill, penalties, and interest (yikes).

And always collect a W-9 before paying a contractor. This keeps your vendor records clean and avoids scrambling if a payment crosses the $2,000 line.

 

What does the new 1099 NEC threshold mean for me as an independent contractor?

Your tax liability doesn’t change. Your income is taxable 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, 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 protects you if totals shift later and saves you from extra tax issues.

“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 keep good 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. The IRS expects you to report all earnings, even without a form.

“Do I have to pay self-employment tax on my 1099 income?”

Yes, as an independent worker, you are responsible for paying self-employment taxes, which cover Social Security and Medicare. This tax is 15.3% on your net self-employment earnings and is your responsibility because you don’t have an employer to pay half.

 

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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