Yes, for the 2024 and 2025 tax years, businesses must generally file Form 1099-NEC or 1099-MISC if they pay an independent contractor or vendor $600 or more in a calendar year for services. This threshold is scheduled to increase to $2,000 for the 2026 tax year.
For each person to whom you have paid at least $600 for the following during the year (Form 1099-NEC): Services performed by someone who is not your employee (including parts and materials)
The 1099-NEC only needs to be filed if the business has paid you $600 or more for the year. Even if you made less than $600, you'll still need to report all your income on your tax return.
A 1099 requirement is triggered when a business pays an independent contractor or unincorporated entity $600 or more (increasing to $2,000 after 2025) in a calendar year for services, or makes other specific payments like royalties or rents, requiring the payer to report these to the IRS using Form 1099-NEC (for services) or 1099-MISC (for other income), unless the recipient is a corporation (with exceptions for law firms).
The IRS $600 rule refers to a change in reporting requirements for third-party payment apps (like Venmo, PayPal) for taxable income from goods and services, where platforms must send a Form 1099-K if you receive over $600 in a year, intended to capture gig economy/side hustle income, though delays and phased implementation have adjusted the timeline, with current rules for 2024 using a higher threshold ($5,000) before fully phasing to $600 for future years, but remember all taxable income, regardless of form, must always be reported.
One Big Beautiful Bill Act of 2025 increases 1099 thresholds
The OBBBA also changes the reporting threshold for Form 1099-MISC and Form 1099-NEC. Currently $600, the threshold will increase to $2,000 for tax year 2026. For 2027 and subsequent years, the threshold for both forms will be adjusted for inflation.
If you pay independent contractors, you may have to file Form 1099-NEC, Nonemployee Compensation, to report payments for services performed for your trade or business.
New 1099 reporting rules, driven by the \"One Big Beautiful Bill Act\" (OBBBA) of 2025, significantly change thresholds for tax year 2026: the 1099-NEC/MISC reporting minimum rises from $600 to $2,000, while Form 1099-K reverts to the original $20,000 and 200+ transactions rule, eliminating planned lower levels for 2025/2026. Businesses must track all payments, as these new thresholds only affect reporting to the IRS, not the underlying taxability of income.
To give someone a 1099, you must first gather their <1099-W9-form-information, determine the correct form (usually 1099-NEC), fill out Copy A for the IRS and Copy B for the recipient, then file Copy A with the IRS (electronically or by mail by January 31st) and provide Copy B to the contractor by the same deadline, keeping Copy C for your records. Electronic filing via the IRS IRIS system or third-party software is often recommended, especially for larger volumes.
Key Takeaways. Businesses that send you a Form 1099 are also required to send the same information to the IRS. So, if you don't include reportable income on your tax return, the system that matches tax returns to the information in the IRS systems will likely flag your tax return for further evaluation.
The 1099 NEC filing threshold is $600 or more. However, there are exceptions where you must file regardless of the amount: If you performed backup withholding on the payment, you must report it regardless of amount. If you are reporting direct sales of consumer products for resale totaling $5,000 or more.
Key Takeaways
If a business intentionally disregards the requirement to provide a correct Form 1099-NEC or Form 1099-MISC, it's subject to a minimum penalty of $660 per form (tax year 2025) or 10% of the income reported on the form, with no maximum.
When a business pays an independent contractor for services performed in the course of that business, the service recipient must file Form 1099 MISC if the payment is $600 or more for the year, unless the service provider is a Corporation.
Situations that don't require 1099s
But you won't send one to the self-employed housekeeper who cleans your home. The IRS lists other non-reportable activities, such as: Most payments to a corporation or an LLC treated as an S corporation. Rental payments to property managers or real estate agents.
A 1099 significantly affects taxes because you're considered self-employed, meaning you pay both income tax and the full self-employment tax (15.3% for Social Security & Medicare), as there's no employer to split it with. This usually means setting aside 25-35% of your income, and you'll likely need to make quarterly estimated tax payments to avoid penalties, though business expense deductions can lower your taxable amount.
The 1099-NEC form for payments made during the calendar year is generally due to your 1099 vendors by January 31—giving you one month from the end of the tax year to fill out and issue those forms.
For most service payments (nonemployee compensation), you'll get a 1099-NEC if you made $600 or more from one payer in 2024 and 2025, but this threshold changes to $2,000 for the 2026 tax year and beyond, adjusted for inflation; other forms like 1099-MISC (rent/royalties) and 1099-K (payment apps) have different rules, but you must always report all your income regardless of whether you receive a form.