The 1099s you send in January 2027 cover payments you make in 2026, and they are the first ones under new rules. The One Big Beautiful Bill Act, signed in July 2025, raised the threshold for the most common contractor forms for the first time in decades, reset the payment-app threshold, and the IRS is changing how the forms are filed. Most of it makes life easier for a small business. One part catches people out.
This post covers what changed, what did not, and what to check before the year closes. It is general information, not advice for your situation. The [IRS instructions for Forms 1099-MISC and 1099-NEC](https://www.irs.gov/instructions/i1099mec) are the source for every figure below.
The contractor threshold: $600 becomes $2,000
For payments made after December 31, 2025, you file Form 1099-NEC for a contractor you paid $2,000 or more during the year. Before that the figure was $600. The same change applies to most Form 1099-MISC boxes, including rent and other income. From 2027 the $2,000 figure will be adjusted for inflation each year, so it will not stay a round number for long.
The test is the calendar year the payment was made, not when the work was done or when you file. That gives two practical consequences.
- Forms for 2025 payments, which were due in January 2026, still used the $600 threshold. If you are catching up on 1099s that were never issued for 2025 or earlier, the old figure applies to those years
- For 2026, a contractor you paid $1,500 needs no 1099-NEC. A contractor you paid $2,000 or more still does, exactly as before
A raised threshold does not change what is taxable. The contractor still reports every dollar on their own return, and you still deduct what you paid them. Only the paperwork moved.
What did not change
- The January 31 deadline. Form 1099-NEC is due to the contractor and to the IRS by January 31, on paper or electronically. There is no later e-file date for this form
- Form 1099-MISC keeps its own dates: January 31 to the recipient, then February 28 to the IRS on paper or March 31 electronically
- Royalties are still reported from $10, and gross proceeds paid to an attorney, such as a settlement paid through their office, are still reported from $600
- Payments to an attorney for legal services are still reported even when the law firm is a corporation. Most other payments to corporations remain exempt
- Payments you made by credit card, debit card or through a payment app such as PayPal are reported by the processor on Form 1099-K, not by you on a 1099-NEC
- Whether someone is a contractor at all. If they work your hours, with your tools, under your direction, they may be an employee, and the threshold is irrelevant. See employee or contractor
The part that catches people out: backup withholding
Backup withholding is the rule that requires you to withhold 24% from a payment when the payee has not given you a correct taxpayer identification number, usually because you never collected a Form W-9. The $2,000 threshold applies to backup withholding too, so payments below it are no longer reportable and do not trigger it.
The trap is timing. You often do not know in March that a contractor will cross $2,000 by December. If you wait to find out, you reach January with a reportable payee and no W-9. Collecting a W-9 before the first payment, from everyone you pay for services, is still the simplest way to avoid both the backup withholding problem and a scramble at year end.
Payment apps and Form 1099-K
The Act also reset the threshold for Form 1099-K, which payment apps and online marketplaces send to sellers. A third-party network only has to file one when a payee receives more than $20,000 across more than 200 transactions in the year. The lower thresholds that had been scheduled for earlier years were withdrawn, so the $20,000 and 200 test now applies to those years as well. Payments taken by card through a card processor are different: they are reportable at any amount.
Two things follow for a small business that sells through Square, Stripe, PayPal, Venmo or a marketplace:
- You may receive fewer 1099-Ks, but every sale is still income. The form is a cross-check, not the definition of what you owe tax on
- When you do receive one, it shows gross payments before fees, refunds and chargebacks, so it will not match your deposits. Your books need to show how the two agree. See payment apps and deposits that never match
New boxes on the 2026 forms
Form 1099-NEC and Form 1099-MISC have new boxes for cash tips, the occupation code for tipped work, and overtime pay. They support the new deductions for tips and overtime, and they matter mainly to businesses that pay tipped or hourly workers outside payroll. Most small businesses paying a bookkeeper, a web designer or a subcontractor will leave them blank. If you think they apply to you, that is a sign to check how those workers are classified.
Filing electronically: 10 forms and a new IRS system
If you file 10 or more information returns in a year, you must file them electronically. The count is across all types combined, including W-2s, so a business with 7 employees and 4 contractors is over the line.
The IRS is also retiring its older electronic filing system. From the 2026 tax year, filed in early 2027, the Information Returns Intake System, IRIS, is the only IRS route for information returns. If you file 1099s yourself through the IRS rather than through payroll or accounting software, apply for IRIS access well before January, because applications take time to process. If your payroll provider or bookkeeper files them for you, confirm they are set up for it.
South Carolina
South Carolina only wants the 1099s on which South Carolina income tax was withheld. The SCDOR filing instructions say not to submit 1099s with zero South Carolina withholding. Where tax was withheld, the forms go to SCDOR by January 31, through MyDORWAY if you file 10 or more W-2s and 1099s. Employers also file the annual withholding reconciliation, the WH-1606, by January 31. The South Carolina payroll tax guide covers the rest of the state side.
What to do before December 31
- Pull a list of everyone you paid for services in 2026, and how you paid them
- Take out payments made by card or payment app, payments for goods, and most payments to corporations
- Flag everyone at or near $2,000, and everyone paid as an attorney
- Get a W-9 from anyone on the list you do not have one for, now rather than in January
- Decide who files: your payroll provider, your accounting software, or you through IRIS
- If anyone on the list looks more like an employee than a contractor, deal with that first
Our payroll service prepares and files year-end W-2s and 1099s for the businesses we work with, and our bookkeeping keeps the vendor records that make the list above a ten-minute job rather than a weekend. If you are the contractor rather than the payer, see 1099 vs W-2 and our self-employed tax services.
About the author
LaToya Clark-Thompson founded Elite Pro-Tax & Financial Services to give individuals and small business owners in the Upstate straightforward, year-round tax and bookkeeping support — not just a filing service that disappears in April.
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